If Donald Trump is re-elected United States president in November, Americans can expect higher inflation, slower economic expansion and a larger national debt, economists say.
Trump’s economic calendar for his second term includes increasing import price lists, cutting taxes and deporting millions of undocumented immigrants.
“Inflation will be the biggest impact” of a Trump presidency, Bernard Yaros, lead U. S. economist at Oxford Economics, told Al Jazeera.
“That is, in the end, the biggest risk. If Trump is president, price lists are sure to go unnoticed. The question is to what extent they go and to what extent,” Yaros said.
Trump has proposed imposing blanket price lists of 10% on all imported goods and levies of 60% or more on Chinese imports.
During Trump’s first term, from 2017 to 2021, his administration pushed for tariff increases that, at their peak, affected about 10% of imports, mainly goods from China, Moody’s Analytics said in a report published in June.
However, those levies have inflicted “measurable economic damage” on the agriculture, production and shipping sectors, according to the report.
“The buildup of price lists covering nearly all imports of goods, as recently proposed by Trump, goes beyond any previous measures,” Moody’s Analytics said in its report.
Companies pass on the highest rates to their customers, thus increasing costs for consumers. They can also influence companies’ decisions about how and where to invest.
“There are three principles in the Trump campaign and they are all going in the same inflationary direction,” Matt Colyar, deputy director of Moody’s Analytics, told Al Jazeera.
“We didn’t even think about adding retaliatory price lists into our style, because who knows what size and what shape the tit-for-tat style might take,” Colyar added.
When the United States opened its borders after the COVID-19 pandemic, the influx of immigrants helped alleviate shortages of hard work in sectors such as construction, manufacturing, recreation and hospitality.
The labor market recovery has helped bring inflation down from its peak of 9. 1% in mid-2022.
Trump only proposed the mass deportation of between 15 and 20 million undocumented immigrants, but he also proposed restricting the entry of migrant personnel with visas.
This situation, combined with a wave of retirements of baby boomers (around 10,000 of whom leave the labor market every day) would put pressure on wages, as happened with the pandemic, a trend that has only recently begun to decline.
“We can think that it will throw enough sand in the gears of the immigration procedure that there will be much less immigration, which is inflationary,” Yaros said.
Since hard-work prices and inflation are two metrics that the United States Federal Reserve considers when setting its benchmark interest rate, the central bank could simply announce additional rate hikes, or at least wait longer before cutting them.
This would make the recession a “serious risk once again” for Moody’s.
Adding to those inflationary considerations are Trump’s proposals to extend his 2017 tax cuts and reduce the corporate tax rate from 21% to 20%.
While Trump’s proposed tariff increases would offset some of the loss of gains, they would fully offset the shortfall.
According to Moody’s, the U. S. government would generate $1. 7 trillion in benefits from Trump’s tariffs, while his tax cuts would charge him $3. 4 trillion.
Yaros said government spending would also be very likely to increase, as Republicans look to increase defense budgets and Democrats push for more social spending, further fueling inflation.
If President Joe Biden is re-elected, economists expect no philosophical change in his approach to imposing taxes on imports. They will continue to use targeted tariff increases, such as the recently announced 100 percent price lists for Chinese electric cars and solar panels. to help U. S. companies compete with Chinese government-backed companies.
Since Trump’s tax cuts are set to expire in 2025, a second Biden term would see some of those cuts extended, but not all, Colyar said. Primarily, tax cuts for people with higher incomes, such as those earning more than $400,000 a year, would expire.
Although Biden has said he will increase the corporate tax from 21% to 28%, given the department in Congress, he is unlikely to approve the measure.
The contrasting economic visions of the two presidential candidates have created unwanted uncertainty for businesses, Colyar said.
“Companies and investors are struggling to stay on top of [their plans] given the other two directions that the U. S. election could take,” Colyar said.
“In my entire tenure, geopolitics has never received as much attention as it does today,” he added.