“Trump’s election would be more disruptive” Bill Gross Warns of Budget Deficit Woes if Trump is Re-Elected
(GETTY)
If Donald Trump is re-elected, budget deficits will grow, and the bond market will suffer more than under another Joe Biden administration, warned experienced bond investor Bill Gross in a recent interview with the Financial Times.
Gross acknowledged that Biden has overseen an expansion in U.S. debt, with deficits rising to 8.8% of GDP last year from 4.1% in 2022. However, Gross, often referred to as the “Bond King,” predicts more severe issues from Trump than from the incumbent president, according to Fortune.
“Trump is the more bearish of the candidates simply because his programs advocate continued tax cuts and more expensive things,” Gross told the FT. He added, “Trump’s election would be more disruptive.”
Bill Gross, a renowned bond investor and co-founder of PIMCO (Pacific Investment Management Company), is famous for establishing the first universally accessible investable market for fixed-income securities. Before this, bonds were rarely traded and only through paper documents. PIMCO provides mutual funds and account services to individual, institutional, and high-net-worth clients.
Gross’ comments coincide with Trump’s pledge to extend the tax cuts he enacted in 2017. In contrast, Biden has stated he would let the cuts expire but would not allow taxes to increase for Americans earning less than $400,000 a year.
The Treasury Department has released a wave of bonds as long as the nation’s deficits stay in the billions. Bond prices have also suffered due to the Federal Reserve’s decision to reduce its balance sheet and maintain higher interest rates for longer.
According to Congressional Budget Office (CBO) projections, the budget deficit in 2024 will be $1.6 trillion. “It’s the deficit that is the culprit; a $2 trillion [annual] increase in supply, is going to put some pressure on the market,” Gross said.
Gross is the second notable economic expert to raise concerns about Trump’s presidency and its impact on the economy. Earlier this year, Nouriel Roubini, known as Dr. Doom for accurately predicting the US subprime crisis in 2008, suggested that Trump’s economic plans “now pose the greatest threat to economies and markets around the world,” according to Raw Story.
“The biggest geopolitical risk to growth and markets is the U.S. election,” said Roubini, noting that while Trump and Biden have similar foreign policy aims, their approaches differ significantly regarding NATO, Europe, and the Russia-Ukraine crisis. “As the saying goes, ‘It’s the economy, stupid.’ Trump’s proposed economic-policy agenda is now the greatest threat to economies and markets around the world,” he wrote.
Roubini cited Trump’s more protectionist foreign exchange policies, which might have catastrophic effects globally. Trump has already said he would impose a 10% tariff on all imports coming to the U.S. (the average tariff rate is currently about 2%), and presumably even higher tariffs on imports from China. “This would spark new trade wars, not only with strategic rivals like China but also with America’s allies in Europe and Asia, such as Japan and South Korea,” ‘Dr. Doom’ wrote.
