Nobel laureate Joseph Stiglitz has declared that Donald Trump’s tariff threats have transformed the US into a daunting environment for investment. In a revealing interview, he expressed fears that these policies may trigger stagflation—a toxic mix of stagnant economic growth paired with soaring inflation. Stiglitz argued that uncertainty surrounding these unpredictable tariff measures, combined with Trump’s apparent disregard for legal frameworks, is dampening corporate confidence in the US market.
He elaborated on the dilemma facing global corporations: Should they view the US as a viable market or merely a regional player? This indecision influences where businesses choose to establish their factories. Stiglitz also pointed to troubling signals from figures like Elon Musk, who has attempted to trim government departments without congressional approval, alongside Trump’s blatant disregard for established contracts, further dissuading investor interest.
Without clarity, the US economy may witness a significant slowdown, as inflation rates expand due to Trump’s tariffs and reactions from other nations. As these dynamics unfold, investors are becoming increasingly sceptical about the US Federal Reserve’s potential to lower interest rates, leading to heightened unease during a looming global trade war. Stiglitz, renowned for his expertise, noted that the Fed is understandably apprehensive about inflation stemming from these policies, which could necessitate raising interest rates to offset economic stress.
The imminent consequences of tariffs on pricing are universally acknowledged by economists, though exact impacts will vary. Stiglitz ominously forecast a scenario of stagflation, where inflation rises alongside a weakened economy. He perceives a deep malaise within the global economic landscape due to the uncertainty bred by Trump’s governance.
In a remark on US Treasury policies, Stiglitz addressed the notion of reducing 10-year Treasury yields, emphasising that this manoeuvre could ripple through global markets, subsequently easing Washington’s borrowing costs. However, he critiqued that achieving this goal through proposed economic frameworks would merely lead to damaging outcomes. “The inflation from the tariffs is going in the wrong way, and the only thing that is going in the right way for Bessent is his efforts to crater the economy,” he stated, underscoring the perilous direction of these economic policies.
Joseph Stiglitz warns that Trump’s tariff threats are making the US an undesirable investment locale, risking stagflation. The uncertainty around these policies hampers corporate growth and investor confidence. Stiglitz believes increasing inflation from tariffs will strain the economy and lead to higher interest rates. He criticises current treasury strategies as detrimental to economic stability.
In summary, Joseph Stiglitz offers a stark warning about the risks posed by Trump’s tariff policies, branding the US as a perilous landscape for investments. The interplay of tariff-induced inflation and economic stagnation threatens to create stagflation. Without strong and stable economic governance, the future stands uncertain, weighing heavily on corporate decisions and investor confidence.
Original Source: www.theguardian.com
