WASHINGTON – Fed up with high prices and unimpressed with an economy that, by all accounts, is a healthyAmericans demanded change when they voted for president.

They might get it.

President-elect Donald Trump has pledged to reverse many of the Biden administration’s economic policies. Asset campaigned on promises to impose huge tariffs on foreign products, cut taxes on individuals and businesses, and deport millions of undocumented immigrants working in the United States.

Through their votes, tens of millions of Americans expressed confidence in Trump’s ability to restore the low prices and economic stability they remember from his first term – at least until the COVID recession – 19 of 2020 paralyzes the economy, then a powerful recovery sends inflation skyrocketing. . Since then, inflation has fallen and is almost back to normal. However, the Americans are frustrated by the still high prices.

“His record was, overall, positive, and people look back now and think, ‘Oh, OK.’ Let’s try one more time,” said Douglas Holtz-Eakin, a former White House economic adviser, director of the Congressional Budget Office and now president of the conservative think tank American Action Forum.

Since Election Day, the Dow Jones Industrial Average skyrocketed more than 1,700 points, largely due to expectations that tax cuts and broad easing of regulations will accelerate economic growth and boost corporate profits.

Maybe they will. Yet many economists warn that Trump’s plans risk worsen inflation he pledged to eradicate and increase the federal debt and ultimately slow growth.

Trump’s policies could boost inflation

The Peterson Institute for International Economics, a leading think tank, estimated that Trump’s policies would reduce America’s gross domestic product – the total output of goods and services – by $1.5 trillion to $6.4 trillion through 2028. Peterson also estimated that Trump’s proposals would lead to a sharp rise in price within two years: inflation, which would otherwise occur at 1.9% in 2026, would rise to between 6% and 9.3% if Trump’s policies were fully implemented.

Last month, 23 Nobel Prize-winning economists signed a letter warning that a Trump administration “will lead to higher prices, larger deficits and greater inequality.”

“Among the most important determinants of economic success,” they write, “are the rule of law and economic and political certainty, and Trump threatens all of these.” »

Trump inherits an economy that, despite frustratingly high prices, appears fundamentally sound. Growth occurred at a healthy pace Annual rate of 2.8% from July to September. Unemployment is 4.1% – quite low by historical standards.

Among rich countries, only Spain will grow faster this year, according to forecasts from the International Monetary Fund. The United States is the economic “envy of the world,” the Economist magazine recently declared.

The Federal Reserve is so convinced that U.S. inflation is slowing toward its 2% target that it lower its key rate in September and again this week.

Americans are deeply unhappy with prices

However, consumers still bear the scars of the inflationary surge. Price on average are still 19% higher than they were before inflation began to accelerate in 2021. Grocery bills and rent increases continue to cause hardship, particularly for low-income households. However inflation-adjusted hourly wages increased for more than two years, they are still below what they were before President Joe Biden took office.

Voters expressed their frustration at the polls. According to AP VoteCast, a large survey of more than 120,000 voters across the country, or 3 in 10 voters said their family was “falling behind” financially, up from 2 in 10 in 2020. About 9 in 10 voters were at least somewhat concerned about the cost of groceries, 8 in 10 about the cost of health care, housing or gasoline.

“I don’t think it’s deep or complicated,” Holtz-Eakin said. “The real problem is that the Biden-Harris team made people worse off, and they were very angry about it, and we saw the result.”

The irony is that mainstream economists fear that Trump’s remedies will make price levels worse, not better.

Tariffs are a tax on consumers

The centerpiece of Trump’s economic agenda is tax imports. It’s an approach he says will reduce U.S. trade deficits and force other countries to grant concessions to the United States. During his first term, he raised tariffs on Chinese goods, and now he’s promising the same thing: Trump wants to raise tariffs on Chinese goods to 60% and impose a “universal” tax of 10 or 20% off all other products. imports.

Trump insists other countries pay tariffs. Actually, American companies pay them – and then typically pass on their higher costs to their customers via higher prices. This is why taxing imports is normally inflationary. Worse yet, other countries typically retaliate by imposing tariffs on U.S. products, thereby hurting U.S. exporters.

Kimberly Clausing and Mary Lovely of the Peterson Institute calculated that Trump’s proposed 60% tax on Chinese imports and his high-end 20% tariffs on everything else would impose an after-tax loss on a typical American household of 2 $600 per year.

The economic damage would likely extend globally. Capital Economics researchers calculated that a 10% U.S. tariff would harm Mexico the most. Germany and China would also suffer. All of this depends, of course, on the extent to which he actually does what he said during the campaign.

Evictions would shake the US job market

Trump threatened to deport millions of undocumented immigrantspotentially undermining one of the factors that allowed the United States to control inflation without falling into recession.

The Congressional Budget Office reported that net immigration – arrivals minus departures – reached 3.3 million in 2023. Employers needed the new arrivals. After the economy rebounded from the pandemic recession, businesses struggled to hire enough workers, particularly because many native-born baby boomers were retiring.

Immigrants filled the void. Over the past four years, 73% of those entering the workforce were foreign-born.

Economists Wendy Edelberg and Tara Watson of the Brookings Institution’s Hamilton Project found that by increasing the supply of workers, the influx of immigrants allowed the United States to create jobs without overheating or accelerating inflation.

The Peterson Institute estimates that deporting the 8.3 million immigrants suspected of working illegally in the United States would reduce U.S. GDP by $5.1 trillion and increase inflation by 9.1 percentage points here 2028.

Big tax cuts could inflate the federal deficit

Trump proposed extending the 2017 tax cuts for individuals that were set to expire after 2025 and restoring tax breaks for businesses that were being cut. He also called for eliminating taxes on Social Security benefits, overtime and tips, as well as further reducing the corporate tax rate for U.S. manufacturers.

The Penn Wharton budget model from the University of Pennsylvania estimates that Trump’s tax policies would increase budget deficits by $5.8 trillion more than 10 years. Even if the tax cuts generated enough growth to recoup some of the lost tax revenue, Penn Wharton calculated, deficits would still increase by more than $4.1 trillion between 2025 and 2034.

The federal budget is already unbalanced. The aging population has necessitated increased spending on Social Security and Medicare. And past tax cuts have reduced government revenue.

Holtz-Eakin said he worries that Trump has little appetite to take the steps — Social Security and Medicare cuts, tax increases or some combination — needed to bring the budget closer together. federal balance significantly.

“That’s not going to happen,” Holtz-Eakin said.