Trumponomics 2.0 Will Awaken Bond Vigilantes
Donald Trump is pitching policies that look likely to be inflationary. But don’t underestimate the dynamic relationship between markets and the former president’s mind.
As president, Trump cared a great deal about markets.
Photographer: Drew Angerer/Getty Images North AmericaTaken at face value, there are a lot of inflationary proposals in Donald Trump’s economic agenda. If elected, he could extend his 2017 tax cuts amid yawning budget deficits and dramatically curb labor supply by sending the National Guard to deport millions of undocumented immigrants. He could push a 10% across-the-board import tariff and 60% duties on Chinese goods specifically, and has allies that might reportedly try to undermine Federal Reserve independence. Fortunately, markets can nudge Trump toward moderation.
After a weekend assassination attempt that has galvanized support for the former president, yields on longer-term Treasury securities rose a bit more than shorter-term ones on Monday, a subtle sign that the Trump inflation threat is on the market’s radar. It’s a trend, known as the “Trump trade,” that’s been gaining momentum ever since President Joe Biden’s dismal debate performance, and it seems likely to continue as the perceived odds of a Trump election victory climb. Betting markets now put Trump’s chances of reclaiming the White House at 69%, according to PredictIt, up from around 52% a month earlier. While Trump and his fellow Republicans blame Biden and the Democrats for the inflation of the past three years, speakers at the Republican National Convention on Monday offered few details as to how he’d perform better.