Trump would add 'significant' uncertainty to economy: Nouriel Roubini

There are a lot of questions about former President Trump's and Vice President Kamala Harris's economic policies.

NYU Stern School of Business professor emeritus & Hudson Bay capital senior advisor Nouriel Roubini aka 'Dr.Doom' joins Catalysts to give insight into how both candidates for president would handle the economy and the Federal Reserve.

"Harris is going to be certainly more predictable. It's slight variance relative to what Biden does, but we know what those policies are. And actually those policies have been reasonably good," Roubini says, noting the strong economic growth and stocks at all-time highs.

He follows that up with: "In the case of Trump, we know that there will be significant more amount of uncertainty and volatility. There is a set of policies he could have that could be actually making sense for the economy. And for the market. But if you take at face value what he wants to do on trade, on currency, on monetary and fiscal policy will be highly dangerous."

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Nicholas Jacobino

Video Transcript

No.

When you look ahead to the November election, lots of focus on former President Trump's policies.

What, exactly?

Maybe a second Trump presidency would ultimately mean for the markets and for the economy.

How big of a risk do you see a second trump presidency posing here for the economy and why?

Well, it depends on what he does if he does what he says is going to do.

Impose first of all, 10% tariffs on all goods in the US up to 60% on Chinese goods, making the tax cuts per month of 2017 that cost you $4.5 trillion without paying for them.

Maybe changing the head of the Fed power, somebody else more dovish, changing the head, the vice chair for bank supervision, somebody more dovish.

And if he wants to weaken the currency, all these things are going to imply higher inflation, devaluation tariffs.

It's going to imply the larger budgets are going to push.

Bound is higher, and you could have actually, if these are implemented, both stock market correction significant and a significant increase in bond yields.

Some of his economic advisers are not fine tuned with the real economy and financial market.

Others are so those who are more sophisticated say we are to increase the tariffs gradually.

We are going to have energy policy by increasing fossil fuel production to push down the price of oil and natural gas.

We are going to finance some of the permanent tax cuts by tariffs by phasing out all the subsidies and by reducing further salt deduction and so on.

So there is a set of coherent policies that reduce the market impact that is negative of its policy.

But its policy at face value, currency trade, monetary policy and fiscal policy would imply higher inflation, risk of debt, not a sustainable collapse of the stock market and rising bundles.

But I think if that happens and if that's those policy, there will be a significant amount of market discipline and they have to react to it.

Changing its policies in the UK at least trust did not last for more than 44 days because the fiscal stimulus is not sustainable led to a collapse of the currency.

Rising bond yields a pension crisis in a matter of days, so I think the markets are there even in the case of the US, in spite of being a global reserve currency, there is market discipline.

If policies become unsustainable, eventually, markets are going to pressure whoever is going to be in power to change those policies.

That's the main constrained more than and everything else.

And just to put a ball on that No, it sounds like you think Harris is better for the economy and markets.

Let's put it this way.

Harris is going to be certainly more predictable.

It is slight Vance to what Biden does, but we know what those polls are.

And actually, those polls have been reasonably good.

Growth is strong.

Stock market all time high bond yields are low.

Job creation is solid unemployment rate.

There are many problems in the US economy, but as I said, they are secular.

They are not partisan.

In the case of Trump, we know that there will be significant more amount of uncertainty and volatility.

There is a set of policy he could have that could be actually making sense for the economy and for the market.

But if you take at face value what he wants to do on trade on currency on monetary and fiscal policy will be highly dangerous.

The question is, if he is in power, is he going to choose advice going to go in that direction as opposed to something more stable?

Honestly, we don't know.

There is much more uncertainty with Trump.