On Monday, January 20, Donald Trump will take over from Joe Biden as president of the United States. It can have major financial effects.
When inflation has finally decreased in Sweden, there may be a new price increase shock from the USA. Inflation and interest rates are largely controlled by what happens on the other side of the Atlantic. “When the US coughs, the world gets the flu,” it says.
American economists have coined a new word: Trumpflation. If you Google that word, you get a long list of hits in business magazines from the US via Europe to Japan – often linked to a concern for the future.
Increase inflation
– Trump’s policies risk raising American inflation up to 9 percentage points, writes Nobel laureate and Trump critic Paul Krugman in the New York Times, for example.
Above all, it is Trump’s threat of tariffs that economists are talking about. Customs duties are a type of tax on imported goods, such as cars. That makes foreign cars more expensive in the US and could help US car companies.
But the risk is that other countries, such as the EU and China, respond with the same coin and introduce tariffs on their imports from the USA. It’s called a trade war and could lead to prices rising everywhere.
– Trump wants to raise tariffs on all Chinese goods. His policy can cost a typical American family about $1,700 (about SEK 19,000) a year, writes Yahoo Finance.
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Donald Trump also promised to deport illegal immigrants. Then there will be more shortage of labour. That drives up wages and eventually raises prices in general.
Trump also wants to cut taxes to boost the economy. Even that tends to lead to more inflation.
If inflation increases in the US and in the world, the Riksbank usually raises its interest rates, which would result in higher mortgage rates in Sweden.
– We can import US inflation, says Alexandra Stråberg, chief economist at Länsförsäkringar, in the clip above.
If all of Trump’s policies really come to pass, the turnaround in the economy may take longer in Sweden as well. In that case, it will take time for unemployment to decrease.
Hear several economists in the video above about how the Swedish economy can be affected by Trump.