‘Dr. Doom’ Rubini: “Trump Poses Major Threat to Global Economy... Growth Will Slow and Inflation Will Rise”

"The economic policy agenda proposed by former President Donald Trump is becoming the greatest threat to the global economy and markets."

Professor Nouriel Roubini of New York University, known on Wall Street as 'Dr. Doom,' expressed concerns about former President Trump, who is widely expected to run as the Republican candidate in the upcoming November presidential election.

Professor Nouriel Roubini, New York University

원본보기 아이콘

In a Project Syndicate article on the 5th (local time), Professor Roubini stated, "If former President Trump wins the U.S. presidential election this November, the world will become even more unstable."

Nicknamed Dr. Doom for predicting the global financial crisis, he said, "We have entered a period of intensified geopolitical competition and conflict," diagnosing that "the greatest geopolitical risk is the U.S. presidential election." In this election, incumbent President Joe Biden and former President Trump, who are likely to have a rematch, moved one step closer to the general election through the simultaneous primaries held on 'Super Tuesday.'

First, Professor Roubini noted that although President Biden and former President Trump share a 'hawkish stance on China' as a priority in foreign policy, they differ in their positions regarding the Ukraine war and the North Atlantic Treaty Organization (NATO). He said, "Some worry that former President Trump will abandon Ukraine and let Russia win. However, (Trump) would be concerned about the signal it would send to Taiwan if Russia were to occupy Ukraine." This means that as a proponent of a tough policy on China, former President Trump does not want the signal of China's occupation of Taiwan to strengthen.

Professor Roubini predicted, "What former President Trump truly wants is for NATO member countries in Europe to spend more on defense," adding, "In that case, he could recognize the value of alliances while shifting the strategic focus to Asia to contain China."

Former U.S. President Donald Trump [Photo by Reuters]

원본보기 아이콘

The economic policy is expected to have the greatest impact under a second Trump administration. Professor Roubini emphasized, "There is no doubt that U.S. protectionist policies will become more aggressive." He said, "Former President Trump has already stated he would impose a 10% tariff on all imports. The current tariff rate is about 2%," and predicted, "He will likely impose higher tariffs on Chinese imports." He also warned, "This could trigger new trade wars not only with strategic competitors like China but also with Asian and European allies such as Japan and South Korea." Such trade wars were already observed during the first Trump administration.

Professor Roubini cautioned, "If a global trade war breaks out, growth will decline and inflation will soar," adding, "This will be the greatest geopolitical risk that markets need to watch." Furthermore, he expressed concern that "scenarios of deglobalization, decoupling, fragmentation, protectionism, Balkanization of global supply chains (the phenomenon of splitting into multiple countries or regions), and de-dollarization pose even greater risks to economic growth and financial markets."

Additionally, Professor Roubini forecasted that former President Trump's fiscal policy could further increase the already excessive fiscal deficit. Various tax cuts set to expire are expected to be extended, and spending on defense and other areas will expand. He warned, "In this case, bond vigilantes could shock the bond market with rising government bond yields," adding, "Given the rising levels of high private and public debt, this could summon the specter of a financial crisis." Bond vigilantes refer to investors who aggressively sell government bonds to push yields higher when there are concerns about inflation or government fiscal deficits.

In this article, Professor Roubini viewed the ongoing Ukraine war, the Israel-Hamas conflict, and U.S.-China tensions as having limited impact on the global economy so far. He assessed that if the Middle East war escalates, disruptions in energy production and exports could cause a situation similar to the global stagflation shock of the 1970s, but fortunately, this possibility is low. Regarding U.S.-China tensions, he also judged that the 'powder keg' issue of Taiwan is unlikely to erupt this year or next. He added, "Due to China's economic vulnerabilities, confrontations with the West, including the U.S., will decrease," and "As long as strategic competition management continues, the impact on the global economy will be minimal."

Meanwhile, in an interview with Bloomberg TV the day before, Professor Roubini stated that an excessively strong U.S. economy could exert downward pressure on the stock market. He explained that robust economic indicators are pushing back expectations for Federal Reserve (Fed) rate cuts, which could trigger a market downturn. He referred to the fact that after the Fed confirmed its hawkish stance in August-September last year, the stock market corrected by 10%, and questioned, "What if the Fed cuts rates not three times as indicated in the dot plot this year, but only twice or once?"

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.