JPMorgan Chase has raised concerns about the potential economic repercussions of the upcoming presidential election. In a recent interview with Bloomberg, David Kelly, Chief Global Strategist at JPMorgan, highlighted former President Trump’s inclination towards raising tariffs on imports as a means to lower income taxes. Kelly warned that if Trump were to win over Biden and implement significant tariff hikes, it could exacerbate stagflation.

“I believe that recent developments, particularly the debate, significantly increase the chances of a Republican victory in November… If they do win and Trump follows through on his promises, we could see much higher tariffs, which historically have led to stagflation. Tariffs not only dampen economic growth but also drive up inflation,” Kelly explained.

Kelly also expressed concerns about the fragility of the current economy, suggesting that a sudden policy shift could potentially trigger a recession. He cited Trump’s immigration policies as another factor that could negatively impact economic stability.

“If we take Trump’s immigration policies at face value, they could potentially lead to a slowdown due to the deportation of undocumented or illegal immigrants. However, history suggests that taking his statements at face value may not be prudent. Nonetheless, the possibility of a policy shock tipping the economy into recession cannot be dismissed,” Kelly cautioned.

Regarding the future of Trump’s 2017 tax cuts, Kelly pointed out uncertainties looming over their continuation under different electoral outcomes.

“The fate of the 2017 tax cuts hinges on the election result. If Biden wins, some of the tax cuts may be extended beyond 2025, but not all. On the other hand, if Trump secures reelection, it is likely that the entire package will remain intact. This, coupled with projections from the CBO regarding economic growth and national debt, suggests that by the early 2030s, the debt as a percentage of GDP could reach 135%, up from the current 122%. Extending all tax cuts would consequently lead to higher long-term interest rates,” Kelly remarked.

Kelly did not specifically delve into the economic implications of a second Biden term. However, back in April, JPMorgan Chase CEO Jamie Dimon expressed some optimism regarding Biden’s economic policies, noting their partial effectiveness.

“When substantial amounts of money are injected into the economy, growth naturally follows. Some aspects of Biden’s economic strategy, such as the infrastructure initiatives, have received bipartisan support and are viewed positively. Nevertheless, there are concerns among segments of the American public, particularly in rural and urban areas, about the tangible benefits they might reap from these initiatives,” Dimon remarked.

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