Donald Trump’s economic strategies, particularly his tariffs and disregard for the rule of law, have created an environment that risks making the US a “scary place to invest,” according to Nobel laureate Joseph Stiglitz.
The former World Bank economist has raised alarms that these policies could trigger stagflation, a dangerous mix of rising inflation and weak economic growth, posing a serious threat to both the US and global markets.
In an interview with The Guardian, Stiglitz pointed out that uncertainty surrounding Trump’s tariff threats and his often unpredictable approach to governance were undermining investor confidence.
He explained that this instability could have long-lasting effects on the US economy, including a potential slowdown in growth and a rise in inflation, as companies hesitate to make investments in such an unpredictable environment.
Uncertainty and Its Economic Consequences
According to Stiglitz, the central issue is the unpredictability created by Trump’s policies, particularly his tariff threats. Stiglitz argued that tariffs not only increase costs but also escalate global trade tensions, which have a direct impact on inflation.
These tariffs have led to retaliation from other countries, further exacerbating inflationary pressures. “Almost all economists agree that the tariffs will increase prices,” Stiglitz noted, emphasising that this could push the economy towards stagflation, where inflation rises without corresponding economic growth.
The economist also pointed to Trump’s unconventional approach to governance, such as his efforts to slash government departments without congressional approval, as a signal of instability.
Additionally, Trump’s repeated disregard for legal contracts, including trade agreements like the US-Mexico-Canada pact, further adds to the risk for investors. “How much risk do you want? The US has become a scary place to invest,” Stiglitz said, referring to the breakdown of trust in legal and economic frameworks.
Impact on Investment and Global Confidence
The uncertainty surrounding the US economy has led to a slowdown in investment, as companies are increasingly hesitant to commit to long-term projects.
For businesses, particularly those operating globally, the risks posed by Trump’s tariff policies and the unpredictable political landscape are creating significant barriers.
“If you’re a corporate in the US or in Europe, do you think you have a global market, or do you have just a European market?” Stiglitz asked, underscoring how the unpredictability of US policies affects decision-making.
Stiglitz also pointed to the Federal Reserve’s concerns over the inflationary effects of Trump’s policies. Rising inflation could prompt the Fed to raise interest rates, which would further dampen economic activity.
With the world’s largest economy potentially facing inflation and stagnant growth, Stiglitz warned that the global economy would also suffer as a result.
The economist suggested that, rather than benefiting from lower Treasury yields, the ultimate effect of Trump’s policies could be economic decline.
