Evgeny Goryunov, Head of the Monetary Policy Department at the Gaidar Institute, explained in a commentary for Vzglyad why Trump’s policy could harm the US economy.
"It’s not so much about the trade war, but about the unpredictability of the US administration’s actions. Yesterday it was the announcement of tariffs, today it was an attempt to press through the Fed leadership and inclined to soften monetary policy, and what will happen tomorrow? And then there’s the war on universities, which are an important exporter of services and work to reduce the trade deficit. Trust and predictability are critical and irreplaceable resources when it comes to finance. The current actions of the US administration contribute to the destruction of trust in its financial institutions and currency, which is forcibly reflected in the charts of the dollar exchange rate and government bond yields," the expert emphasized.
"We have a situation where neither investors, companies, consumers, nor politicians in other countries have any idea what other desperate actions the U.S. administration will take in the near future. Uncertainty kills incentives to invest: why put a lot of money into production if it’s not clear what will happen a year from now? Uncertainty leads to an increase in interest rates, as the risks of US budget issues go from fantasy to hypothetical, but still potential. Conflict with the Fed will drive inflation expectations, which will also pull rates up. In general, if a weak dollar by itself could play a useful role for the US economy, then when this weakening is combined with inadequate and unpredictable actions of the administration, there is approximately no chance that it will work," said Evgeny Goryunov.