Trump's Inflation Pledge vs. Economic Reality
Throughout his presidential campaign, former U.S. President Donald Trump has repeatedly promised that "inflation will vanish completely" if he is elected to a second term. Economists warn, however, that his policy proposals—higher tariffs on imported goods, the deportation of millions of migrant workers, and influencing Federal Reserve interest rate policies—would worsen inflation.
"We believe that a second Trump term would have a negative impact on the U.S.'s economic standing in the world and a destabilizing effect on its domestic economy," reads a letter signed by 16 Nobel Prize-winning economists in June.
They are not alone. Economists nationwide recently voiced concerns to the Associated Press, citing Trump's main policy proposals as "inflationary."
Criticisms of Harris's Economic Agenda
These economists also criticized Vice President Kamala Harris's ideas, such as her plan to combat inflation by further regulating price gouging. While they consider her plan ineffective, they agree it is not inflationary.
Inflation and rising living costs have weighed against Harris's campaign, with many Americans associating the Biden administration with the consumer price increases that began more than three years ago.
The Cost of Living Under the Biden-Harris Administration
According to the Associated Press, grocery prices have risen approximately 21% under the Biden-Harris administration, and inflation has raised overall costs by about 19%. Experts attribute rising costs to various factors, including pandemic-related supply chain issues and "greedflation," a term referring to companies capitalizing on pandemic-era disruptions.
Trump's Proposed Tariffs: A Path to Higher Prices?
One of Trump's proposals to tackle inflation is to impose higher tariffs on imported goods. If elected, Trump plans to enact a 60% tariff on all Chinese goods and a "universal" tariff of 10% or 20% on all other imports, according to AP.
Recently, Trump also proposed tariffs exceeding 200% on Mexican vehicles to disrupt cross-border car sales. Trump asserts that the cost of taxing imported goods would be absorbed by the foreign countries that produce them.
Economists, however, contend that U.S. importers pay these tariffs and typically pass the costs to consumers in the form of higher prices. "There's no question that tariffs are inflationary," Kent Smetters of the University of Pennsylvania's Penn Wharton Budget Model told the AP. "Exactly how much—that's where economists can debate."
Impacts of Tariffs on American Households
Economists from the Peterson Institute calculated that Trump's proposed 60% tax on Chinese imports, along with a 20% tax on high-end imported goods, would cost the average American household about $2,600 annually.
The Trump campaign notes that U.S. inflation remained low even when Trump imposed similar tariffs during his presidency. However, economists warn that the current economic climate is not the same as it was in 2019, when the goal was to raise inflation, not reduce it.
Mark Zandi, Chief Economist at Moody's Analytics, told the AP that Trump's proposed tariffs are much higher this time around. "The Trump tariffs in 2018-19 didn't have as large an impact because they applied to just over $300 billion in mostly Chinese imports," he said. "Now, he's talking about tariffs on over $3 trillion in imports across all countries."
The Cost of Deportation
Trump's plans for mass deportations and increased influence over the Federal Reserve also worry economists.
Economists note that immigration has helped ease inflation. However, Trump has pledged to conduct the largest deportation operation in the nation's history.
A 2015 study by the American Action Forum—a self-described "center-right" economic think tank—estimated it would cost $18,214 to identify, detain, transport, process, hold, and expel each migrant. Adjusted for inflation, that amount is now about $24,094 per person, according to a new report by El País.
If there are an estimated 11 million undocumented immigrants currently in the U.S., the total cost would be $265 billion. If Trump's estimate of 20 million undocumented immigrants is accurate, the cost would be around $481 billion.
To put this into perspective, these figures far exceed the combined budget of nearly $30 billion for Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP) in 2024.
Risks to Federal Reserve Independence
Trump's proposed "say" in the Federal Reserve—widely regarded as the chief inflation-fighting entity—also concerns economists. Research cited by AP shows that the Fed can only manage inflation effectively when it remains free of political pressure, as politicians seeking re-election often avoid supporting interest rate hikes, which are necessary to curb inflation.
From a peak of 9.1% in 2022, the Fed has managed to reduce inflation close to its 2% target. According to a Peterson Institute report, compromising the Fed's independence would likely increase inflation by two percentage points per year.
Inflation and Job Security Take Center Stage for Voters
With the 2024 elections around the corner, pocketbook issues are anticipated to be a key topic, with polls showing that Americans are primarily concerned about inflation and job security.
While economists are not necessarily enthusiastic about Harris's economic agenda, they do not consider her proposals inflationary. Zandi of Moody's Analytics told AP that Harris's proposals would leave the inflation outlook virtually unchanged, even if Democrats gained a majority in both chambers.
In contrast, economists predict that Trump's policies would cause inflation to rise between 6% and 9.3% by 2026, compared to the current estimate of 1.9%.
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