Trump economic policy inflation/ Trump tariffs inflation/ Trump immigration inflation/ inflation policy 2024/ Trump economic plans 2024/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ Donald Trump’s proposed economic policies could increase inflation, according to economists. His plans to impose tariffs, deport millions of immigrants, and influence the Federal Reserve’s decisions may lead to higher consumer prices. Analysts caution that Trump’s approach may disrupt a currently stabilizing inflation rate.
Trump’s Economic Proposals and Inflation Quick Look
- Main Concerns: Trump’s policies could push inflation back up, economists warn.
- Tariffs: Proposed tariffs on imports, especially from China, would increase consumer costs.
- Immigration: Deporting migrant workers could tighten the labor market and push wages up.
- Federal Reserve: Trump’s pledge to influence the Fed’s rate decisions could undermine its independence and worsen inflation.
Experts Warn Trump’s Economic Plans Could Trigger Inflation Surge
Deep Look
As Donald Trump campaigns to return to the White House, he is vowing to eliminate inflation entirely. But many economists argue that his policy proposals could have the opposite effect, with some of his key ideas likely driving inflation even higher. Trump’s approach, which centers on imposing steep tariffs on imports, deporting millions of undocumented immigrants, and asserting influence over the Federal Reserve, is seen by experts as inflationary in the current economic climate.
In recent months, inflation has come down from a peak of 9.1% in 2022 to a level closer to the Federal Reserve’s 2% target. But the Peterson Institute for International Economics forecasts that Trump’s policies could raise inflation to between 6% and 9% by 2026. Sixteen Nobel Prize-winning economists warned in an open letter that Trump’s plans could “reignite” inflation and destabilize the economy.
Tariffs and Consumer Costs
Trump’s strategy for controlling inflation relies heavily on tariffs, which he argues will protect U.S. jobs from foreign competition. During his first term, he implemented tariffs on Chinese goods and other imports like steel and aluminum, initiating a trade war with China. Now, he plans to expand this approach with a 60% tariff on Chinese goods and a “universal” tariff of up to 20% on all imports.
While Trump contends that tariffs make foreign companies bear the costs, economists clarify that U.S. importers generally pay these fees, passing costs onto American consumers. Analysis from the Peterson Institute estimates that a 60% tariff on Chinese imports plus a 20% tariff on other goods would cost the average American household $2,600 per year.
Economist Mark Zandi from Moody’s Analytics notes that the impact would be far greater than during Trump’s first term, when tariffs were applied only to $300 billion of Chinese imports. This time, Trump’s proposal affects over $3 trillion in goods, which would likely hit consumers’ wallets harder, fueling inflation.
Immigration and Labor Market Impact
Trump’s plans to conduct “the largest deportation operation” in U.S. history also raise concerns about inflation. The recent increase in immigration has helped balance labor demand and reduce inflation, as foreign-born workers fill roles across various industries. Economists Wendy Edelberg and Tara Watson from the Brookings Institution found that the influx of immigrants has allowed job creation without overextending the economy.
Net immigration surged to 3.3 million in 2023, far exceeding initial projections. With foreign-born workers meeting job market needs, wages have stabilized, reducing the pressure on employers to raise prices. If Trump’s proposed deportations proceed, the resulting labor shortages would likely drive wages up, potentially leading to an inflationary spike. The Peterson Institute predicts that mass deportations could drive inflation up by 3.5 percentage points by 2026.
Federal Reserve Independence
Trump’s recent pledge to “have a say” in the Federal Reserve’s interest rate decisions has alarmed many economists, who view the Fed’s independence as critical for effective inflation management. During his previous term, Trump often pressured Fed Chair Jerome Powell to lower interest rates to boost economic growth. Historically, similar political pressure under Presidents Lyndon Johnson and Richard Nixon is blamed for fueling inflation in the late 1960s and 1970s.
The Federal Reserve’s role is to control inflation by adjusting interest rates, typically raising them to curb excessive borrowing and spending. Trump’s desire to influence these decisions raises concerns about inflation control. According to the Peterson Institute, politicizing the Fed’s rate decisions could increase inflation by an additional 2 percentage points per year, especially if the Fed is unable to act independently.
Harris’s Economic Approach
Vice President Kamala Harris’s economic agenda differs in both focus and impact. While economists don’t universally endorse her policies, which include measures to address price gouging, they agree her approach is unlikely to fuel inflation. Moody’s Analytics found that Harris’s policies would have a neutral effect on inflation, even if she had a Democratic majority in Congress.
Harris’s stance on the Federal Reserve aligns with the institution’s independence, ensuring its ability to regulate inflation without political interference. Her policies focus on economic equity without threatening inflationary pressures, contrasting with the forecasted outcomes of Trump’s proposals.
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