Scotiabank's Derek Holt highlights fiscal and global stability concerns over Trump's proposed policies
In a recent note to investors, Derek Holt, head of capital markets economics at Bank of Nova Scotia, issued a stark warning about the potential impacts of a second presidential term for Donald Trump on the US and global economies.
As reported by the Financial Post, Holt cautioned that Trump’s proposed policies would lead to “extreme protectionism, a large negative population shock and a surge of debt issuance” to fund what he termed “totally undisciplined fiscal policy.”
Holt asserted that Trump’s approach would undermine democratic and market institutions, posing a serious threat to economic stability.
According to Holt, the US economy does not require additional stimulus due to its “excess demand,” which he believes will persist into the next year. He expressed concern that Trump’s fiscal plans would destabilize world markets in an already divided global landscape.
On immigration, Holt stated that while border control is necessary, “Trump’s extreme immigration policies would severely damage the US economy.”
Additionally, he warned that “America’s fiscal position is living on borrowed time,” suggesting that current fiscal practices would lead to higher taxes in a “more divided and more dangerous world.”
A recent Bloomberg Economics analysis supports Holt’s fiscal concerns, estimating that Trump’s tax-cut proposal could elevate US debt to 116 percent of GDP, up from its current level of 99 percent.
By comparison, a Harris administration platform would see debt rise to 109 percent of GDP.
Holt’s critique stands out, given that it is unusual for a Canadian bank economist to address US politics so directly.
As Canada sends approximately 75 percent of its exports to the US and is the top export destination for 34 US states, Holt noted that Canada has significant interest in the trajectory of US trade and foreign policy.
He clarified that his note was not an endorsement of Kamala Harris, who, like other Democrats, has made “major errors” on immigration policy, including her opposition to the revised US-Mexico-Canada trade agreement in 2020.
Holt framed the choice as a matter of selecting the “less damaging” candidate, stating, “As a professional economist, I have no doubt that this means voting against Donald Trump and the weak self-serving men behind him.”
Some Canadian economists have expressed a more neutral stance on the economic effects of a Trump presidency. Economists from Desjardins Group indicated that while Trump’s tariff policies might slow global growth, his fiscal plans could also stimulate certain risk assets, such as equities.
Similarly, a recent Bloomberg survey of economists suggested that US economic growth and inflation projections would be relatively consistent, regardless of whether Harris or Trump wins the election.
Holt further criticized Trump’s foreign policy, specifically his “clear preference toward allowing Russia to have its way with Ukraine, and China with Taiwan.”
Holt described these stances as potentially the most serious foreign policy missteps since the 1930s appeasement policies.
In closing, Holt acknowledged that some in his field might dismiss his perspective, stating, “There are those in my industry who I know will scoff at this. They will put self-interest above the nation’s and the world’s interests.”
