President-elect Donald Trump’s upcoming term promises a different economic landscape than his first, according to Eswar Prasad, a top Ivy League economist. The US is in a strong position to withstand a tariff war, while the rest of the world struggles with “a deep economic funk.”
Prasad notes that the US has demonstrated strong productivity growth, which could cushion the impact of inflation from tariffs. He also expects tariffs to boost the dollar, making US exports less competitive but drawing more investment.
However, China’s economy is weaker than before Trump’s initial round of tariffs, with consumer demand stagnant and a real estate crisis. Europe and Japan face even greater economic challenges. As a result, Beijing may be forced to impose barriers on cheap Chinese exports.
Trump plans to close loopholes that allow China to dodge tariffs, potentially affecting companies like Shein and Temu. The US has leverage, and the rest of the world must adapt to his tariff policies. Prasad predicts that other countries will need to become more creative in dealing with Trump’s trade threats.
While some members of Trump’s team signal less of a hard-line stance on tariffs, it remains uncertain how far he will push his commitments. One thing is clear: the US economy sees favorable conditions for tariffs under Trump’s second term.
Source: https://fortune.com/2024/12/29/trump-tariffs-could-leave-the-us-as-the-relative-winner-among-global-economies-ivy-league-professor-says