On January 7th, Schroders Global Investment released a document stating that due to the expected economic growth-friendly policies of President-elect Trump, Schroders Global Investment recently raised its forecast for the US economy. However, Schroders Global Investment's expectations may be too optimistic, as Trump may implement the previously promised radical policies. Schroders Global Investment pointed out that compared to the scenario of a "US consumer recession", the impact of global trade and supply chain disruptions on economic growth is more significant. However, due to the large-scale fiscal stimulus policies, coupled with retaliatory tariffs and currency depreciation relative to the US dollar, the downward risks of inflation are expected to be limited. Trump's radical policies have different impacts on the economies of the US and various regions globally. Weak trade, stalled investment decisions, and overall market confidence setbacks may lead most economies into recession, resulting in significant rate cuts, but this may lead to stagflation in the US. Supply constraints will lead the US into stagflation In the scenario of radical policies, Trump may attempt to introduce large-scale fiscal stimulus measures, but strong demand will accelerate the deterioration of supply issues. Although some impacts are offset by the strong dollar and profit margins, significant tariff increases may increase commodity inflation. However, the greater threat to inflation may come from the crackdown on immigration and mass deportations, which could lead to labor shortages, ultimately leading to wage increases and service sector inflation. An analysis by the Peterson Institute for International Economics suggests that an additional 10% import tariff may temporarily increase US inflation by about one percentage point, but mass deportations could rapidly increase inflation by over three percentage points and take several years to normalize. GDP growth may initially decline as a result and only improve after the introduction of stimulus measures by 2026. Estimates from the Pew Research Center based on the American Community Survey suggest that around 8.3 million US employees are estimated to be illegal immigrants in 2022. Schroders Global Investment estimates that supply damage to the US economy will reduce its potential growth rate to around 1.5% per year, meaning nominal growth will deviate from real growth and tend towards inflation. While other central banks are cutting rates significantly in 2025, stagflation will make it difficult for the Fed to ease monetary policy, leading to a further strengthening of the US dollar. This may lead to strong criticism from the Trump administration, and Fed Chair Powell may be replaced by someone advocating for a looser monetary policy by the end of his term in May 2026. Schroders Global Investment believes that in order to stimulate economic growth, US interest rates will fall to 3% by the end of 2026. This, along with twin deficits, will eventually lead to a decline in the US dollar.