{"id":32812,"date":"2025-06-29T17:16:40","date_gmt":"2025-06-29T17:16:40","guid":{"rendered":"https:\/\/financialrush.com\/?p=32812"},"modified":"2025-06-29T17:16:40","modified_gmt":"2025-06-29T17:16:40","slug":"trumps-fiscal-policy-and-attacks-on-fed-put-us-safe-haven-status-at-risk-economists-say","status":"publish","type":"post","link":"https:\/\/financialrush.com\/?p=32812","title":{"rendered":"Trump\u2019s fiscal policy and attacks on Fed put US safe-haven status at risk, economists say"},"content":{"rendered":"<p> \n<\/p>\n<div>\n<p>Unlock the White House Watch newsletter for free<\/p>\n<p class=\"article__content-sign-up-topic-description o3-type-body-base\">Your guide to what Trump\u2019s second term means for Washington, business and the world<\/p>\n<p><iframe class=\"article__content-sign-up-iframe close\" scrolling=\"no\" id=\"signUpIframe\" data-prev-url=\"\/register\/in-article-sign-up?ft-content-uuid=0d73bb57-676e-4e73-93ec-03bdb22235de&amp;newsletter-id=65b8fec772badb00166eafc6\"><\/iframe><\/div>\n<div id=\"article-body\">\n<p>Donald Trump\u2019s \u201cbreathtaking fiscal policy excess\u201d and attacks on the Federal Reserve\u2019s independence risk diminishing the US\u2019s status as the ultimate safe haven for foreign investors, economists polled by the Financial Times have warned.<\/p>\n<p>The poll, conducted by the Kent A Clark Center for Global Markets at the University of Chicago Booth School of Business, found that more than 90 per cent of economists surveyed were either somewhat concerned or very concerned about the safe-haven role of US dollar denominated assets over the next five to 10 years. <\/p>\n<p>The White House insisted this week that Trump\u2019s economic policies will help cut US debt as it made a final pitch to <a href=\"https:\/\/www.ft.com\/content\/6051dfe5-566d-41ce-a2b0-37fb441af839\" data-trackable=\"link\">win over fiscal hawks in the Senate<\/a> and get the president\u2019s flagship tax bill over the line.<\/p>\n<p>But independent estimates, including by fiscal watchdog the Congressional Budget Office, indicate the measures contained in the <a href=\"https:\/\/www.ft.com\/us-budget\" data-trackable=\"link\">budget<\/a> bill \u2014 which Trump has dubbed \u201cthe big beautiful bill\u201d \u2014 will push the US federal debt past its previous post-second world war high later this decade.<\/p>\n<p>While the <a href=\"https:\/\/www.ft.com\/us-dollar\" data-trackable=\"link\">dollar<\/a> usually appreciates during bouts of global market panic, the sharp sell-off in global equity markets following Trump\u2019s unveiling of aggressive reciprocal tariffs on April 2 was coupled with a depreciation of the US currency. <\/p>\n<p>The benchmark S&amp;P 500 has since recovered and is at an <a href=\"https:\/\/www.ft.com\/content\/4dec99d5-ccec-4ad3-99af-e8b2a04a7c7f\" data-trackable=\"link\">all-time high<\/a> amid hopes that Trump\u2019s economic policies will not derail growth or fuel inflation in the world\u2019s largest economy.<\/p>\n<p>\u201cThe safe-haven assets appear to be [the] Swiss Franc and gold. In fact, [the] US looks like an emerging market, whereby policy uncertainty leads to rising risk premia that drive long-term yields up and the currency value down,\u201d said Saroj Bhattarai at the University of Texas at Austin. <\/p>\n<p>The dollar is trading at a three-year low amid concerns over fiscal sustainability and question marks over the Federal Reserve\u2019s independence, as <a href=\"https:\/\/www.ft.com\/content\/c6127c95-4b28-4777-aa6b-77bd28c9e5e9\" data-trackable=\"link\">Trump continues to attack chair Jay Powell<\/a> over his reluctance to cut interest rates amid concerns that the global trade war could push up inflation.<\/p>\n<div class=\"n-content-layout\" data-component=\"flourish\" data-component-id=\"23976812\" data-component-type=\"flourish-in-article\">\n<figure class=\"n-content-picture n-content-layout__container\"><a href=\"#23976812\"><picture data-asset-type=\"flourish\" data-flourish-id=\"23976812\" data-flourish-type=\"visualisation\">\n<div id=\"23976812\" class=\"cp-message o-message o-message--inform o-message--notice\" data-o-component=\"o-message\">\n<div class=\"o-message__container\">\n<div class=\"o-message__content\">\n<p class=\"o-message__content-main\">Some content could not load. Check your internet connection or browser settings.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<p><\/picture><\/a><\/figure>\n<\/div>\n<p>\u201cBreathtaking fiscal policy excess is all but guaranteed, and that invites, though hardly guarantees, a change of heart about dollar assets,\u201d said Robert Barbera at Johns Hopkins University. <\/p>\n<p>\u201cMarry that emerging reality to a de facto White House takeover of the Fed \u2014 through a Powell firing or the championing of a hack as a Powell replacement? That would move me from somewhat concerned to very, very concerned.\u201d <\/p>\n<p>Powell\u2019s term ends in May 2026 and speculation is rife that Trump could name his <a href=\"https:\/\/www.ft.com\/content\/b626ec0e-fd69-41cc-b231-1234f9834d7e\" data-trackable=\"link\">pick to replace him<\/a> early in a bid to undermine the Fed chair. <\/p>\n<p>\u201cFiscal deficits, deliberate government actions to shrink the US financial account and devalue the dollar, uncertainty about succession at the Fed and questions about Fed independence all negatively affect [the safe haven status of the dollar],\u201d said Anna Cieslak at Duke University. <\/p>\n<div class=\"n-content-layout\" data-component=\"flourish\" data-component-id=\"23977428\" data-component-type=\"flourish-in-article\">\n<figure class=\"n-content-picture n-content-layout__container\"><a href=\"#23977428\"><picture data-asset-type=\"flourish\" data-flourish-id=\"23977428\" data-flourish-type=\"visualisation\">\n<div id=\"23977428\" class=\"cp-message o-message o-message--inform o-message--notice\" data-o-component=\"o-message\">\n<div class=\"o-message__container\">\n<div class=\"o-message__content\">\n<p class=\"o-message__content-main\">Some content could not load. Check your internet connection or browser settings.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<p><img decoding=\"async\" src=\"https:\/\/www.ft.com\/__origami\/service\/image\/v2\/images\/raw\/https%3A%2F%2Fpublic.flourish.studio%2Fvisualisation%2F23977428%2Fthumbnail%3FcacheBuster%3D972898?source=cp-content-pipeline&amp;fit=scale-down&amp;quality=highest&amp;width=1020&amp;dpr=1\" alt=\"\"\/><\/picture><\/a><\/figure>\n<\/div>\n<p>US Treasury yields, which usually fall in times of market volatility, rose in early April. While the benchmark 10-year yield has since fallen to about 4.3 per cent, many economists polled believe it could soon hit 5 per cent \u2014 a level that would spark concern within the Trump administration. <\/p>\n<p>Almost three-quarters of the survey\u2019s 47 respondents tipped the yield on 10-year debt to rise above 5 per cent by the middle of next year. <\/p>\n<p>\u201cUS Treasury [bonds] might not be a safe asset any more,\u201d said Evi Pappa at Universidad Carlos III de Madrid. \u201cLook at what happened at \u2018liberation day\u2019 to the US 10 year versus European yields.\u201d <\/p>\n<p>Economists have become more gloomy on the US economic outlook since they were last polled in March. <\/p>\n<div class=\"n-content-layout\" data-component=\"flourish\" data-component-id=\"23964324\" data-component-type=\"flourish-in-article\">\n<figure class=\"n-content-picture n-content-layout__container\"><a href=\"#23964324\"><picture data-asset-type=\"flourish\" data-flourish-id=\"23964324\" data-flourish-type=\"visualisation\">\n<div id=\"23964324\" class=\"cp-message o-message o-message--inform o-message--notice\" data-o-component=\"o-message\">\n<div class=\"o-message__container\">\n<div class=\"o-message__content\">\n<p class=\"o-message__content-main\">Some content could not load. Check your internet connection or browser settings.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<p><img decoding=\"async\" src=\"https:\/\/www.ft.com\/__origami\/service\/image\/v2\/images\/raw\/https%3A%2F%2Fpublic.flourish.studio%2Fvisualisation%2F23964324%2Fthumbnail%3FcacheBuster%3D972898?source=cp-content-pipeline&amp;fit=scale-down&amp;quality=highest&amp;width=1020&amp;dpr=1\" alt=\"\"\/><\/picture><\/a><\/figure>\n<\/div>\n<p>The median expectation is now for the world\u2019s largest economy to expand by 1.5 per cent over the course of this year, slightly down from an estimate of 1.6 per cent in the spring. <\/p>\n<p>Separate surveys of economists and US households and businesses show that forecasts for growth and confidence sank rapidly after the April 2 tariffs were announced, but have since partially recovered on the back of the trade truce between the US and China and rises in equity prices. <\/p>\n<p>Economists have also become more hawkish on price pressures, with the median expectations for core PCE inflation this year moving up from 2.8 per cent in March to 3 per cent in June, amid expectations that Trump\u2019s tariffs would be passed on to US consumers. <\/p>\n<p>But only a few respondents\u00a0believed there was a more than 50 per cent chance of core PCE inflation exceeding 4 per cent and the unemployment rate simultaneously exceeding 5 per cent at any point between now and the end of 2026.<\/p>\n<div class=\"n-content-layout\" data-component=\"flourish\" data-component-id=\"23964362\" data-component-type=\"flourish-in-article\">\n<figure class=\"n-content-picture n-content-layout__container\"><a href=\"#23964362\"><picture data-asset-type=\"flourish\" data-flourish-id=\"23964362\" data-flourish-type=\"visualisation\">\n<div id=\"23964362\" class=\"cp-message o-message o-message--inform o-message--notice\" data-o-component=\"o-message\">\n<div class=\"o-message__container\">\n<div class=\"o-message__content\">\n<p class=\"o-message__content-main\">Some content could not load. Check your internet connection or browser settings.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<p><img decoding=\"async\" src=\"https:\/\/www.ft.com\/__origami\/service\/image\/v2\/images\/raw\/https%3A%2F%2Fpublic.flourish.studio%2Fvisualisation%2F23964362%2Fthumbnail%3FcacheBuster%3D972898?source=cp-content-pipeline&amp;fit=scale-down&amp;quality=highest&amp;width=1020&amp;dpr=1\" alt=\"\"\/><\/picture><\/a><\/figure>\n<\/div>\n<p>A better than expected reading for consumer price index inflation in May boosted hopes that less of the cost of tariffs than feared would be passed on to American shoppers. <\/p>\n<p>But the annual figure for core personal consumption expenditures inflation in May, published on Friday, rose slightly to 2.7 per cent, from 2.6 per cent the previous month.<\/p>\n<\/div>\n\n<br \/><a href=\"https:\/\/www.ft.com\/content\/0d73bb57-676e-4e73-93ec-03bdb22235de\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Unlock the White House Watch newsletter for free Your guide to what Trump\u2019s second term means for Washington,&hellip;\n","protected":false},"author":6,"featured_media":32813,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23],"tags":[],"class_list":["post-32812","post","type-post","status-publish","format-standard","has-post-thumbnail","category-us","cs-entry","cs-video-wrap"],"_links":{"self":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts\/32812","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=32812"}],"version-history":[{"count":0,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts\/32812\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/media\/32813"}],"wp:attachment":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=32812"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=32812"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=32812"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}