(Bloomberg) -- A second presidential term for Donald Trump would likely bring about extreme protectionism, a large negative population shock and a surge of debt issuance to fund “totally undisciplined fiscal policy,” a top Canadian economist warned.
The Republican candidate’s proposed policies and “likely debasement of democratic and market institutions would be ruinous to the US and global economies,” Derek Holt, Bank of Nova Scotia’s head of capital markets economics, said in a note to investors.
“The US economy doesn’t need pump-priming, it’s in excess demand and will remain there next year, and Trump’s plans risk being highly destabilizing to world markets in a much more fractured world,” Holt wrote. “The US needs to assert control over its borders, but Trump’s extreme immigration policies would severely damage the US economy.”
Holt added: “America’s fiscal position is living on borrowed time and the more damage that’s done now, the higher taxes will go in future in a potentially more divided and more dangerous world.”
An analysis by Bloomberg Economics last month estimated that US debt may rise to 116% of gross domestic product under Trump’s tax-cut plan, from 99% currently. Under Harris’s platform, it would be on a path to 109%.
It’s highly unusual for a Canadian bank economist to write about US politics using such stark language. Canada ships about three-quarters of its exports to its southern neighbor, and is also a huge importer of goods and services from the US. Canada is the largest export destination for 34 US states, according to calculations by economist Trevor Tombe.
Holt said his note isn’t an endorsement of Kamala Harris, who was one of the few US senators to vote against the revised US-Mexico-Canada trade agreement in 2020. Democrats have made major errors during the Biden administration, including on immigration, the Scotiabank economist said.
“It’s a matter of picking the one you think will be less damaging,” Hold said. “As a professional economist, I have no doubt that this means voting against Donald Trump and the weak self-serving men behind him.”
Other Canadian economists have taken a more balanced view of the economic outcomes of a Trump presidency. While a tariff war is a potential drag on global growth, Trump’s fiscal plans would be a tailwind in other respects — for example, they might trigger a rally in risk assets like equities, economists from Desjardins Group said earlier this month.
The outlook for inflation and economic growth in the US would be roughly the same whether Harris or Trump wins the election, according to a Bloomberg survey of economists published last week.
Trump’s “clear preference toward allowing Russia to have its way with Ukraine, and China with Taiwan,” would be the biggest foreign policy mistakes since the appeasement of Germany in the late 1930s, Holt wrote.
“There are those in my industry who I know will scoff at this,” the economist said. “They will put self-interest above the nation’s and the world’s interests.”
(Updates with additional context from Desjardins and Bloomberg survey of economists, beginning in the ninth paragraph.)
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