Article Summary –
Mainstream economists caution that Trump’s proposed tariffs, mass deportations, and Fed interference could exacerbate inflation rather than eliminate it. Tariffs increase consumer costs, while deportations might tighten labor markets. Politicizing the Fed could undermine its inflation-fighting capability.
Mainstream Economists Warn Against Trump’s Tariff and Immigration Plans
Donald Trump promises that re-election would make “inflation vanish,” appealing to Americans frustrated by rising consumer prices. Yet mainstream economists argue Trump’s proposals, including huge tariffs on imports, mass deportations of migrant workers, and intervening in Federal Reserve policies, could actually worsen inflation.
Sixteen Nobel laureates warned in a June letter that Trump’s plans would “reignite’’ inflation, which has significantly fallen from its 2022 peak of 9.1% to near the Fed’s 2% target.
“Nonpartisan researchers” also predict Trump’s agenda could increase inflation if implemented. Last month, the Peterson Institute for International Economics predicted Trump’s policies — deportations, import taxes, and eroding Fed independence — would drive consumer prices higher by 2026.
Trump’s proposed tariffs are controversial. He claims they protect American jobs and bring benefits, but tariffs raise consumer prices as U.S. importers pass costs to consumers. Tariffs could also allow U.S. producers to boost their own prices due to reduced foreign competition.
Peterson Institute researchers calculated that Trump’s proposed tariffs would impose a $2,600 annual after-tax loss on a typical American household. Trump’s claims that limiting food imports would lower grocery prices face criticism. Economists argue such taxes would make groceries more expensive.
Trump aims to reverse recent immigration surges, which economists say have helped ease inflation by providing workers and limiting wage pressures. The Congressional Budget Office noted a net immigration of 3.3 million in 2023, essential for filling labor gaps as many native-born Americans retire.
Economists Edelberg and Watson found immigrant influxes allowed job growth without worsening inflation. Trump’s mass deportation plan could change this dynamic, potentially increasing 2026 inflation by 3.5 percentage points.
Trump’s desire for a role in Federal Reserve interest rate decisions worries economists. Central banks manage inflation best when independent of political pressure. Trump’s previous pressure on Fed Chair Jerome Powell to lower rates stirred inflation concerns.
The Peterson Institute reports that compromising Fed independence could persistently increase inflation by 2 percentage points annually, indicating U.S. consumers might bear the ultimate cost of Trump’s policies.
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