Scott Bessent, the US Treasury Secretary, has suggested that the administration is eager to reduce the 10-year US Treasury yields. Lowering these yields would allow Washington to borrow at a reduced cost. However, Nobel Prize-winning economist Joseph Stiglitz has expressed serious concerns regarding the current economic climate, attributing the unease to policies implemented by former President Donald Trump.
According to Stiglitz, Trump's tariff threats have transformed the US into a less appealing destination for investors. The unpredictability surrounding Trump's inconsistent tariff plans is likely to decelerate economic growth. In addition, these tariffs, coupled with potential retaliatory measures from other countries, are expected to escalate inflation. Stiglitz remarked on this alarming trend, noting, "The inflation from the tariffs is going in the wrong way, and the only thing that is going in the right way for Bessent is his efforts to crater the economy."
The Federal Reserve is reportedly concerned about the inflationary repercussions of Trump's policies. Rising inflation prospects have led investors to reduce their expectations for the Fed's interest rate cuts. Stiglitz foresees a grim scenario where Trump's policies might precipitate stagflation—a disconcerting economic condition characterized by high inflation and slow growth. He warned, “I could certainly see a scenario where we get to stagflation – we get inflation, and a weak economy.”
Bessent’s attempts to lower Treasury yields might be perceived as a maneuver to destabilize the economy further. Stiglitz contends that the only constructive contribution of Trump's policies towards reducing Treasury yields would be by driving the US economy into turmoil. He declared, “The US has become, I would say, a scary place to invest.”
Stiglitz's expertise stems from his extensive background in economics. He served as chair of Bill Clinton's council of economic advisers and is a former World Bank economist. Currently, he is a professor at Columbia University. Reflecting on Trump’s return to office, Stiglitz highlighted growing concerns over the global trade war's ramifications.