Trump's trade and immigration policies are an 'elixir for stagflation' that could tip the US into recession, JPMorgan strategy chief says

A Trump election victory could trigger a policy shock to the economy, as his immigration and tariff plans are an "elixir for stagflation."

• Trump's trade and immigration stance could shock the economy, JPMorgan's David Kelly told Bloomberg TV.
• Plans for sweeping tariffs are "an elixir for stagflation," while deportations would be recessionary, he said.
• For now, growth is slowing, but it's good enough, Kelly noted.

Donald Trump's pledge to raise trade barriers and deport immigrants could be policy shocks that trigger a recession, JPMorgan's David Kelly told Bloomberg TV.

In a Monday interview, the chief global strategist noted that there are few reasons to fear a slump right now, but a possible Republican win in November could lead to a downturn.

There are a few core proposals in question. On trade, Trump has announced plans for a universal 10% duty on all imports to the US, and has separately touted higher tariffs as a replacement for some income taxes.

As for immigration, the Republican candidate has promised to carry out the largest deportation program in US history. By another measure, he's also said his administration would deport all undocumented workers, totalling some 7.5 million people, the Peterson Institute think tank recently estimated.

"If you take Trump at his word, you've got much higher tariffs. Now, tariffs are an elixir for stagflation. Tariffs slow growth and push up inflation at the same time," Kelly said. "If you took his word on immigration, the economy would come to a halt because of deportation of unregistered immigrants or illegal immigrants."

Kelly's remarks mirror a long list of similar criticisms that Trump's plans have received.

Most recently, former Treasury Secretary Larry Summers has denounced the tariff-income tax swap as "the mother of all stagflations," as trade duties provide nowhere as much revenue as domestic taxes currently do.

Meanwhile, analysts have recognized immigration as a major engine behind the post-pandemic jobs market, with migrants taking up lower-paid roles that have kept employment steady.

Peterson Institute president Adam Posen said last week that deporting these workers would essentially deplete the labor supply and could start a manufacturing-based recession.

For Kelly, it's worth considering how realistic Trump is about implementing his proposals, noting that not everything he previously promised was carried through on.

Still, it's something to think about, he said. "I mean, some policy shock could absolutely tip this economy into recession."

For now, the economy is looking fine, Kelly said. He noted that, though spending is diminishing among lower-income consumers, that's been offset by wealth gains, as well as jobs, and wage growth.

"Consumer spending will grow more slowly, somewhere in the one and a half percent range going forward the rest of this year, as opposed to 2%," he said. "But that's still enough."