WASHINGTON (AP) — With characteristic bravado, Donald Trump has promised that if voters return him to the White House, “inflation will disappear completely.”
It’s a message tailored to Americans still irritated by the rise in consumer prices that began three and a half years ago.
Yet most mainstream economists say Trump’s policy proposals will not overcome inflation. They would make it worse. They warn that his plans to impose massive tariffs on imported goods, deport millions of migrant workers and demand a say in Federal Reserve interest rate policy are likely to send prices soaring.
Sixteen Nobel Prize-winning economists signed a letter in June expressing fears that Trump’s proposals would “fuel” inflation, which has plummeted from a peak of 9.1% in 2022 and is almost back to the 2% target Fed.
Last month, the Peterson Institute for International Economics predicted that Trump’s policies would cause consumer prices to rise sharply after his second term. Peterson’s analysis concluded that inflation, which would otherwise be 1.9% in 2026, would instead rise to 6% to 9.3% if Trump’s economic proposals were adopted.
Many economists are also not happy with Vice President Kamala Harris’ economic agenda. For example, they reject its proposal to combat price gouging as an ineffective tool against high food prices. But they don’t see her policies as particularly inflationary.
Moody’s Analytics has estimated that Harris’ policies would leave the inflation outlook largely unchanged even if she enjoyed Democratic majorities in both houses of Congress. An unchecked Trump, on the other hand, would raise prices by 1.1 percentage points in 2025 and 0.8 percentage points in 2026.
Consumers pay for tariffs
Taxes on imports – tariffs – are Trump’s main economic policy. He argues that tariffs protect American factory jobs from foreign competition and provide numerous other benefits.
During his time in office, Trump started a trade war with China, imposing high tariffs on most Chinese goods. He also raised import taxes on foreign steel and aluminum, washing machines and solar panels. He has big plans for a second term: Trump wants to impose a 60% tariff on all Chinese goods and a “universal” tariff of 10% or 20% on everything else entering the United States.
Trump emphasizes that the costs of taxing imported goods are absorbed by foreign countries. The truth is that U.S. importers pay the tariffs — and typically pass those costs on to consumers in the form of higher prices. The Americans ultimately bear the costs themselves.
Kimberly Clausing and Mary Lovely of the Peterson Institute have calculated that Trump’s proposed 60% tax on Chinese imports and his high 20% tariff on everything else would, in combination, create an after-tax loss for a typical American household of $2,600 per year. year.
The Trump campaign notes that U.S. inflation remained low even as Trump aggressively imposed tariffs as president.
But Mark Zandi, chief economist at Moody’s Analytics, said the size of Trump’s current tariff proposals has dramatically changed the calculations. “The Trump tariffs in 2018-2019 did not have that big of an impact, as the tariffs were only a little over $300 billion of mostly Chinese imports,” he said. “The former president is now talking about tariffs on more than $3 trillion in imported goods.”
And the inflation backdrop was different during Trump’s first term, when the Fed worried that inflation was too low, not too high.
Trump would reverse an immigration wave that helped ease inflation
Trump, who has invoked inflammatory rhetoric about immigrants, has promised the “largest deportation operation” in US history.
For many economists, increased immigration over the past few years has helped curb inflation while staving off a recession.
The sharp increase in the number of foreign-born workers has made it easier to fill vacancies. That helps cool inflation by easing pressure on employers to sharply raise wages and pass on their higher labor costs by raising prices.
Net immigration – arrivals minus departures – reached 3.3 million in 2023, more than triple what the government expected. Employers needed the newcomers. As the economy recovered from pandemic lockdowns, companies struggled to hire enough workers to keep up with customer orders.
Immigrants filled the gap. Over the past four years, the number of people in the United States who have or are looking for a job has increased by nearly 8.5 million. About 72% of them were foreign-born.
Wendy Edelberg and Tara Watson of the Brookings Institution discovered this by increasing the supply of labor. The influx of immigrants allowed the United States to generate jobs without overheating the economy.
In the past, economists estimated that U.S. employers could add no more than 100,000 jobs per month without fueling inflation. But when Edelberg and Watson took the immigration wave into account, they found that monthly job growth could reach 160,000 to 200,000 without putting upward pressure on prices.
Trump’s mass deportations, if carried out, would change everything. The Peterson Institute calculates that U.S. inflation would be 3.5 percentage points higher in 2026 if Trump were successful in deporting all 8.3 million undocumented immigrant workers believed to be working in the United States.
A politicized Fed would make fighting inflation more difficult
Trump alarmed many economists in August by saying he would try to “have a say” in the Fed’s interest rate decisions.
The Fed is the government’s primary inflation fighter. It attacks high inflation by raising interest rates to rein in lending and spending, slowing the economy and cooling the pace of price increases.
Economic research has shown that the Fed and other central banks can only manage inflation effectively if they are kept independent of political pressure. That’s because raising rates can cause economic pain – perhaps a recession – so it’s anathema to politicians seeking re-election.
As president, Trump regularly pursued Jerome Powell, his chosen Fed chairman, to cut interest rates in an effort to undermine the economy. According to many economists, Trump’s public pressure on Powell even surpassed efforts by Presidents Lyndon Johnson and Richard Nixon to push previous Fed chairs to keep interest rates low — measures widely blamed for fueling the chronic inflation of the late 1990s. sixties and seventies helped fuel it.
The Peterson Institute report shows that shaking up the Fed’s independence would increase inflation by 2 percentage points per year.