Inflation is expected to increase in the United States and globally if President Donald Trump fulfills his campaign promises to reduce taxes, tighten immigration policies, and raise tariffs on all imported goods. With a Republican majority in the US Senate and Trump's projected re-election, he is in a strong position to implement his potentially significant economic agenda.
Following Trump's victory, US stock markets opened with significant gains, and the dollar strengthened against major currencies as traders anticipate higher domestic inflation, leading to fewer interest rate cuts by the Federal Reserve. The anticipation of higher interest rates tends to attract more foreign capital seeking greater returns, boosting the value of the dollar.
Investors are also reacting to expectations of Trump's proposed higher tariffs, which could negatively impact the global economy, resulting in increased demand for the dollar as a safe-haven currency. The anticipated policies of tax cuts, tariff hikes, and stricter immigration controls are viewed as inflationary, potentially leading to higher interest rates in the future.
Analysts suggest that Trump's tariff plans may raise prices for imported goods in the US, affecting American consumers. Additionally, his stance on immigration, including the possibility of increased deportations, could raise wage costs for companies, further impacting the economy.
