Trump’s economic proposals would increase inflation and interest rates, economist Mark Zandi saysTrump laid out his economic policy agenda in broad

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Trump’s economic proposals would increase inflation and interest rates, economist Mark Zandi says​

Trump laid out his economic policy agenda in broad terms on the campaign trail, and he's expected to implement these policy changes quickly after being sworn in.

You were warned. The next part is where we say "I told you so."

Trump’s economic proposals would increase inflation and interest rates | Opinion

Trump laid out his economic policy agenda in broad terms on the campaign trail, and he's expected to implement these policy changes quickly after being sworn in.

www.inquirer.com

Former President Donald Trump’s reelection and the Republican Party’s sweep of the Senate and House will result in meaningful changes to economic policy and, therefore, to the economic outlook.

Trump laid out his economic policy agenda in broad terms on the campaign trail. Based on his first term as president, he will pursue policies consistent with his campaign rhetoric, albeit not to the degree that he articulated them during the campaign.

He will also implement these policy changes quickly after being sworn in. Unlike his first term, when it took him nearly all of his first year to assemble an administration and begin implementing his policies, Trump is ready to go this time.

Tariff war​

Arguably, the most significant economic policy change Trump has proposed would be the adoption of higher, broader-based tariffs on imports to the U.S. On the campaign trail, he talked about an across-the-board tariff of 10% or even 20%, as well as 60% on imports from China, and 100% or more on certain products.

Talk of tariffs this high is likely political bluster. However, it would not be surprising if tariffs are significantly increased on China and other countries that have benefited from the diversion of Chinese trade due to existing tariffs. Trump has also called out other potential targets for higher tariffs, including the European Union, Japan, and Korea.


As with the tariffs imposed in Trump’s first term, U.S. consumers will bear the brunt of the cost because the new round of tariffs will mean higher prices on imported goods. While foreign producers will also feel the fallout, as will U.S. distributors and retailers, the consumer far and away suffers most.

Moreover, the tariffs will likely cost U.S. jobs., partly because most countries facing the higher tariffs will respond by imposing their own higher tariffs and other trade restrictions on goods produced here. U.S. manufacturers and farmers will suffer, as they did in Trump’s first term, forcing them to pull back on their payrolls.

Immigrant deportations​

Trump is also set to crack down on the nearly 12 million undocumented immigrants estimated to be already living in this country. He won’t be able to deport all these immigrants since the logistics of mass deportation on this scale are not feasible. Still, the new Trump administration is likely to pursue deportations aggressively.

A wide range of industries that rely on immigrant labor will be affected. The construction trades are a good example. Close to one-third of these workers are immigrants. If many of them are forced to leave their jobs and the country, it will significantly disrupt housing construction and other building as labor shortages are already endemic.


Mass deportation could also meaningfully disrupt agriculture, manufacturing, transportation and distribution, retail, leisure and hospitality, and child and elder care.

Deficit-financed tax cuts​

Promises of tax cuts were also an important part of Trump’s reelection bid. He has promised to extend the individual tax cuts passed in his first term and talked about more cuts to the corporate tax rate.

It is unclear how the tax cuts will be paid for — and thus it is unlikely they will be. Revenues raised from the higher tariffs will help defray their costs, but the tax cuts will be deficit-financed in significant part.

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New corporate tax cuts will provide some lift to long-term growth, but judging by the modest boost from Trump’s much larger first-term tax cuts, they will be on the margin and take years to play out. Most immediately, with the economy at full employment, the fiscal stimulus provided by the deficit-financed tax cuts will add to inflation.

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