Trumponomics for those believing a faux businessman

Trump and his administration claimed credit for much of the economic success during his presidency, including the booming economy ahead of the pandemic-induced shutdowns and recession. However, critics have pointed out that much of the economic progress he points to was inherited from former president Barack Obama’sadministration.

Trump ran a campaign centered on the promise to Make America Great Again (MAGA).Trump’s tariffs are expected to raise the US’s domestic inflation and, with that, force the US central bank to keep interest rates high.

Trump tariffs will most likely also result in a trade war that will disrupt established global supply chains. Forecasters at Pantheon Macroeconomics project that a 10% tariff would increase inflation by about 0.8 percentage points next year and impose an additional drag on U.S. manufacturers

Trade wars will exacerbate global inflation and push the world into another recession. American retailers and manufacturers typically have passed along part of their higher costs to consumers through increased prices while absorbing some of them in smaller profit margins.

The new fees would reduce Americans’ purchasing power by $78 billion, the National Retail Federation estimates, causing households to pull back spending and hurting economic growth. Unchecked government spending and sweeping tariffs on imported goods will fan inflation.The Peterson Institute for International Economics has estimated the levies would cost each U.S. household an average $2,600 a year.

Trump also promised to order large-scale deportation of immigrants and cut taxes and government regulations during his second term. A policy restricting immigration and deports undocumented people likely would be upward pressures on labor costs and a detrimental effect on the nation’s potential economic growth rate.

Immigration has accounted for most of a rise in the labor force that has eased pandemic-related labor shortages and wage growth, helping push down inflation. Sharply constricting immigration probably would push up inflation again and crimp economic growth by curtailing hiring and the additional spending of foreign visitors,

The Committee for a Responsible Federal Budget estimates that Trump’s fiscal policies would add an extra $7.75 trillion in government debt over the next decade. Trump has also vowed to implement massive corporate tax cuts to boost domestic manufacturing. But chances are this might not work in favor of the US economy and could worsen the fiscal deficit.

Benefits to consumer spending from lower taxes would be limited, in part because many of the cuts probably would go to higher-income households that tend to save, rather than spend, their additional income. And the gains likely would be outweighed by the hit to growth from higher tariffs and reduced immigration.

Higher inflation also would mean the Federal Reserve will lower rates just once by a quarter-point next year, Nomura said, instead of the percentage-point drop Fed officials forecast in September.

The Fed is designed to be insulated from political pressure, so that it can make unpopular decisions when necessary to curb inflation. That independence is central to the Fed’s credibility. Trump has routinely flouted that norm, however, suggesting that the president should have a say in monetary policy.