Mohamed El-Erian Warns Trump 2.0 Economic Agenda Could Struggle Due To Maxed-Out Credit Cards

Prominent economist Mohamed El-Erian cautioned that President Donald Trump‘s second-term economic initiatives could face significant challenges from persistent inflation and widening global growth disparities.

What Happened: In a Financial Times opinion piece published on Monday, El-Erian, Chief Economic Advisor at Allianz, highlighted how economic dispersion helped Trump’s electoral victory but could now complicate his policy implementation.

“The U.S. has maintained an enviable growth and employment record in recent years,” El-Erian wrote, noting that benefits have accrued unevenly across society. This “K-shaped” recovery has left significant vulnerabilities among lower-income households, marked by depleted savings and maxed-out credit cards.

The domestic challenges are amplified by international economic divergence. According to Goldman Sachs Group Inc. (GS), the Eurozone’s nominal GDP gains since late 2019 reached only 39% of U.S. levels, while the UK achieved merely 10%. This disparity has driven U.S. bond yields higher, creating negative spillover effects globally.

Market indicators suggest persistent inflation pressures could further complicate Trump’s agenda. The University of Michigan’s consumer survey showed five-year inflation expectations at 3.3%, the highest since 2008, while December’s Consumer Price Index is expected to rise to 2.9% year-over-year from November’s 2.7%.

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Why It Matters: The economic landscape Trump inherits differs markedly from his first term, with mortgage rates above 7% and Treasury yields near 5%. His proposed policies, including new tariffs and immigration restrictions, face scrutiny from economists who warn they could disrupt rather than boost current growth.

“The more the rest of the world lags behind the U.S., the higher the value of the dollar,” El-Erian cautioned, noting that 41% of S&P 500 tracked by SPDR S&P 500 revenues come from abroad, potentially undermining U.S. corporate performance and increasing protectionist pressures.

El-Erian urged the Trump administration to carefully consider these factors when implementing tax and tariff policies, warning that “promising initiatives risk being derailed” without proper attention to economic disparities.

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Disclaimer:?This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.