U.S. economy at risk: Debt crisis and protectionism threats

Both Trump and Harris exhibit "protectionist tendencies," which could worsen the situation of an already well-developing U.S. economy. They also don't promise "fiscal prudence." "Trumponomics," which prioritizes tariffs over taxes, is also a threat.

The U.S. economy is in great shape, although a serious problem is the scale of the country's debt; elements of Donald Trump's and Kamala Harris's programs could ruin this, the media assesses.

Time Magazine surveyed CEOs of the largest U.S. companies; 81% believe the U.S. economy is in surprisingly good condition. The Economist writes that U.S. GDP growth has exceeded analysts' expectations, and the economy is dynamic and innovative.

Consulting firm Deloitte forecasts that by the end of 2024 and into 2025, favourable phenomena such as high consumer spending and significant corporate investment will continue in the U.S., increasing by 4% next year. The economic outlook remains "optimistic," and investor confidence is high. However, in a "pessimistic scenario," the key negative factors are "potential geopolitical conflicts and trade policies, which could lead to persistent inflation."

The adoption of the Inflation Reduction Act in 2022, aimed at spurring "strategic technology manufacturing" in the U.S., such as the production of electric vehicles, batteries, and semiconductors, has accelerated factory construction, and investments in infrastructure increased by 13% in 2023, which should maintain good economic conditions. However, Deloitte reported that escalating conflicts in Ukraine and the Middle East threaten to disrupt supply chains and trade exchange and increase oil prices.

Time Magazine points out that Americans' assessments of the economic situation are more influenced by food prices; although the Fed has curbed inflation, these prices are not falling and have risen by 20% since the start of the pandemic.

Another concern for Americans is high home prices, which have increased by 20% over the past three years. The cost of mortgages has also risen because the Fed has kept interest rates high for a long time. According to the Bank of America, the housing market,​ due to insufficient supply and high demand, which increased dramatically after the pandemic outbreak, could remain "in a bind" until 2026.

However, the most serious problem of the U.S. economy is the scale of the country's debt –​ writes The Economist. This year, the U.S. will spend more on servicing the debt than on defence. It is all the more worrying that both Trump and Harris exhibit "protectionist tendencies," which could worsen the situation.

"The truth is the economy is in pretty solid shape,"​ CNN assesses in an extensive analysis. Even recent signals of rising unemployment are not alarming, as employment levels are higher than at the start of Joe Biden's presidency, and the unemployment rate –​ 4.3% –​ is "historically low."

The Fed's recent decision to cut interest rates by 0.5 percentage points should boost the labour market.

America's most serious problem is a "colossal deficit," and based on Trump and Harris's declarations, it can already be said that they do not promise "fiscal prudence," ​ continues The Economist.

The proposals of both candidates for restoring state finances are fundamentally unserious. Trump has promised to use cryptocurrencies and increase oil drilling to pay off the debt, which "is complete nonsense," –​ explains the British weekly. Harris promised to reduce the debt, but the assessment of her program is more difficult because it lacks specifics. According to the independent research group Penn Wharton Budget Model (PWBM), cited by The Economist, implementing Trump's program would increase the U.S. deficit to about 8% of GDP (currently 6%), and implementing Harris's plans would raise it to 7%.

The Republican candidate's economic assumptions—which the Financial Times calls "Trumponomics"—pose additional risks. He wants to fundamentally change the structure of budget revenues so that tariffs become more significant than taxes. The former president promised universal 10-percent tariffs on all imports and 60% tariffs on goods from China, which could prompt America's trading partners to impose retaliatory tariffs, harming the U.S. economy and consumer purchasing power.

Moreover, implementing prohibitive tariffs and promising to lower taxes threatens higher U.S. debt and increased inflation, which is followed by a recession in America and globally. When Washington imposed high tariffs after the crisis at the end of the 1920s, other countries responded with their tariffs, and global trade ground to a halt, leading to the economic collapse of the 1930s.

The Financial Times forecasts that if the former president wins the election and implements "Trumponomics," it will "fundamentally reshape America’s economy and its relationship with the rest of the world." Meanwhile, CNN notes that even Arthur Laffer, an economist from Trump's entourage, admits, "All of this stuff of sanctions and threats of tariffs and all that stuff is not the right way to go. That’s a way of guaranteeing World War Three."