Trump’s Economic Plans to Worsen Inflation
With characteristic bravado, Donald Trump has vowed that if voters return him to the White House, “inflation will vanish completely.” This statement resonates with many Americans still frustrated by surging consumer prices that began over three years ago.
However, most economists express skepticism, arguing that Trump’s policy proposals would not end inflation; instead, they would exacerbate the situation. His plans to implement extensive tariffs on imported goods, deport large numbers of migrant workers, and seek influence over the Federal Reserve’s (Fed) interest rate policies are seen as likely to further amplify prices.
In a notable letter signed by sixteen Nobel Prize-winning economists, there are concerns that Trump’s proposals could “reignite” inflation, which has significantly decreased since peaking at 9.1 percent in 2022 and is nearing the Fed’s target of 2 percent.
Recent forecasts, such as those from the Peterson Institute for International Economics, suggest that Trump’s policies would push consumer prices sharply higher two years into a potential second term. Their analysis predicts that inflation, which would otherwise be around 1.9 percent in 2026, could soar to between 6 percent and 9.3 percent if Trump’s economic plans were implemented.
Many economists also express dissatisfaction with Vice President Kamala Harris’ economic agenda, criticizing her proposal to combat price gouging as ineffective in addressing high grocery prices. Moody’s Analytics projects that her policies would maintain a similar inflation outlook, while in contrast, Trump’s unrestrained approach could increase prices by 1.1 percentage points in 2025 and 0.8 percentage points in 2026.
Consumers Pay for Tariffs
Trump’s primary economic strategy involves imposing taxes on imports. He argues that tariffs protect American manufacturing jobs from foreign competition and provide various benefits to the American economy.
During his presidency, Trump initiated a trade war with China, imposing significant tariffs on many Chinese goods and raising import taxes on items like steel, aluminum, and household appliances. He has ambitious plans for a second term, aiming to establish a 60-percent tariff on all Chinese goods and a universal tariff of 10 to 20 percent on other imports into the United States.
Trump maintains that the costs associated with tariffs are absorbed by foreign countries, asserting that importers pay the tariffs, which are subsequently passed on to consumers through higher prices. However, economists Kimberly Clausing and Mary Lovely from the Peterson Institute have calculated that Trump’s proposed tariffs could result in an annual loss of $2,600 for a typical American household.
The Trump campaign points out that inflation remained relatively low during his presidency despite the imposition of tariffs. However, Mark Zandi, the chief economist at Moody’s Analytics, notes that the scale of Trump’s current tariff proposals would significantly change the economic landscape. He explains that the tariffs imposed during Trump’s first term did not have as profound an impact, as they were comparatively smaller, amounting to just over $300 billion on mostly Chinese imports.
Moreover, the inflationary context was different during Trump’s earlier presidency, as the Fed was more concerned about inflation being too low rather than too high.
