Zhongtong Finance and Economics learned that David Kelly, chief global market strategist at JPMorgan Asset Management, said that Trump's aggressive tariff plan may slow down the global economy and bring upward pressure on U.S. inflation, highlighting the risks that were largely overshadowed during the stock market rebound period after the U.S. election.

Kelly said, "The first smoke signal indicates that the tariff measures will be very aggressive, and almost nothing is a panacea for stagflation. Stagflation means that inflation is rising while the economy is declining. Countermeasures will only make the whole world worse. The tariff issue will trigger many conflicts. If you hit someone's nose, they will also strike back. That's why they call it a tariff war."

During the campaign, Trump said he could impose a 60% tariff on products from China and a 10% to 20% tariff on goods from other places. He dismissed concerns that tariffs would harm the US economy, calling tariffs the "most beautiful word" in the dictionary, and once pointed out that the US achieved prosperity in the 19th century when it imposed high tariffs and had no federal income tax.

It is not yet clear which specific policy plans Trump will promote, but his victory has prompted multinational companies to rethink the global Supply Chain and discuss raising prices to offset costs. Meanwhile, investors are considering the impact of protectionism on financial markets and U.S. trading partners (including Europe).

Robert Lighthizer, a key advisor to Trump and former United States Trade Representative in his first administration, recently advocated protectionist policies in a commentary article in the Financial Times.

Other strategists on Wall Street have also issued similar warnings. In the bond market, due to traders speculating that Trump's tax cuts and tariff plans will prevent the Fed from cutting interest rates, bond yields have risen significantly. In the US stock market, these concerns have largely given way to optimism about his policies boosting corporate profits.

Dow strategists led by Oscar Munoz and Gennadiy Goldberg expect the Federal Reserve to pause rate cuts in the first half of 2025 as Central Bank policymakers assess the impact of Trump's policies. JPMorgan's Interest Rate strategists also lowered their expectations for Fed rate cuts.

Kelly believes that a conflict between the Federal Reserve and the Trump administration is possible because Trump's policies may be inconsistent with monetary policy, and the focus of monetary policy is still to restrain economic rise and inflation. However, Federal Reserve Chairman Powell refused to comment last week on how Trump's policies would affect the future actions of the Federal Reserve.

Kelly added, 'The Federal Reserve will not assume, speculate, or predict what tariffs or fiscal policies will be. At some point, they will have to fight, but I don't think they want to pick this issue right now.'