Trump 2.0 will cause inflation to soar? Potential Treasury Secretary nominee: Absurd!

Potential candidate for the Treasury Secretary of the Trump administration, former Chief Investment Officer of Soros Fund Management Scott Bessent recently pointed out that Trump's economic policies will not lead to inflation. It is worth mentioning that before Bessent established himself as a fund manager, he was considered as the successor to the financial giant Soros.

Recently, Republicans declared in their official campaign platform: "End inflation and make America affordable again." (In line with Trump's "Make America Great Again")

Ironically, in the eyes of many economists and investors, Trump's policies, including tax cuts, tariff increases, and immigration crackdown, may actually exacerbate inflationary pressures. With the Fed preparing to cut interest rates, a series of potential policy changes are seen as a risk for continued rate cuts in 2025.

Julia Coronado, founder of MacroPolicy Perspectives LLC and former Fed economist, said, "On the surface, Trump's declared policies would at least trigger a significant inflation outbreak."

Investors have been betting on rising long-term Treasury yields in the U.S. bond market. This reflects expectations that Trump, if elected, will strengthen inflation, a bet known as the "Trump trade".

Of course, whether Trump can implement many of his proposals will depend on the composition of Congress. In addition, some of Trump's policy ideas are still vague statements, and if he is elected, these policies may undergo significant changes, especially in the face of opposition from the financial markets.

Coronado asked, " When faced with real trade-offs, how will the Trump administration act? This is a true source of uncertainty."

On Wednesday, Bessent, who is seen as likely to serve as Treasury Secretary in Trump's second term, defended Trump's economic policies, refuting the view that these policies would push up inflation.

At the Milwaukee Republican National Convention, Bessent discussed the views that policies proposed by Trump (such as tariff increases, tax cuts that could increase deficits, and reducing immigration) would lead to inflation.

Bessent said, "I think that's ridiculous. We saw what happened during Trump 1.0: the inflation rate was 1.9%."

He added, "Economists assume that all tariffs will take effect on the first day, but in reality, they will obviously be implemented gradually, deregulation will lead to disinflation, and the same goes for falling energy prices. I believe that under President Trump's leadership, the budget deficit will decrease, not increase."

According to a report from the Committee to Unleash Prosperity, an organization advocating for reduced government spending and deregulation, the average year-on-year consumer price index during Trump's tenure was 1.9%. The report cited data from the U.S. Department of Labor.

Earlier this month, a survey of economists by The Wall Street Journal showed that 56% of respondents believe that if Trump wins, inflation will be higher than if Biden wins, while 16% believe the opposite, and the rest believe there will be no difference Earlier on Wednesday, Bessent attended an economic policy summit hosted by the "Committee for Prosperity", where he reiterated his three-point plan in his speech, calling for deregulation, deficit reduction, and increased oil production.