‘It’s not going to work’: Experts warn Trumponomics could harm US | Donald Trump

As Donald Trump prepares to deliver his economic address to the nation, economists have warned that key elements of his policy agenda – including steep tariffs and sweeping tax cuts – will likely increase inflation and strain U.S. finances.

The Trump campaign will lay out its plans to “make America rich again” as Republicans gather in Milwaukee on Monday for the first day of the party convention.

While the former president has pledged to lower prices “rapidly” if he defeats Joe Biden in November’s presidential election, experts say his policies risk sending them higher.

A second Trump administration would “defeat inflation, tackle the cost of living crisis, improve fiscal health, restore price stability and rapidly lower prices,” according to the Republican National Committee’s official policy platform, released last week.

But economists fear that his plans to impose high tariffs on foreign goods and sweeping tax cuts could backfire.

“If you keep your fiscal promises, it’s going to be meaningless,” said Owen Zidar, a professor of economics and public affairs at Princeton University.

“There’s a difference between reducing prices and reducing inflation,” said Michael R. Strain, director of economic policy studies at the American Enterprise Institute, a conservative think tank. “I don’t think what he’s proposing is going to lead to a pure reduction in prices.”

Inflation hit its highest level in a generation two years ago, prompting Federal Reserve officials to raise interest rates to their highest level in two decades in an attempt to cool the world’s largest economy. The consumer price index has since fallen from its peak of 9.1% to 3%, but millions of Americans still have to contend with rising costs of living.

As Trump tries to blame Biden for inflation and position himself as the man who will “destroy” it, a Wall Street Journal survey of economists — conducted this month and published last week — found that most think inflation, deficits and interest rates would be higher under Trump than under Biden.

Customs tariffs will ‘hurt’

The Republican policy platform, which was reportedly personally edited by Trump, included a pledge to introduce “basic” tariffs. Imported goods would be subject to a 10% tax, according to his campaign.

Such a plan “would hurt the economy,” said Bernard Yaros, chief U.S. economist at Oxford Economics. “If we get broad-based tariffs, that’s going to immediately increase inflation,” he added.

The tariffs are part of an effort to make America “the world’s industrial superpower,” according to the Republican platform. Trump made similar promises, clearly aimed at the country’s industrial centers, in 2016. The results of his first administration were not ideal.

“It’s going to be very difficult to turn the United States into a manufacturing superpower,” said Zidar, who noted that services – from health care to haircuts to vacations – rather than goods “account for 85 percent of the economy, in terms of value added.”

Tax cuts will cost ‘trillions’

Trump’s tax reform plan – extending cuts introduced during his first term, eliminating taxes on tips for hospitality workers and pursuing unspecified “additional” cuts – has raised fears that the vast US budget deficit could balloon under his watch.

His tax plans “will cost trillions of dollars at a time when the budget deficit is growing and the national debt is on an unsustainable trajectory,” Strain said.

There is an “inconsistency between the big tax cuts and the primary goal of reducing inflation,” Zidar said. “If they do what they say, it will be an expansionary policy. It will increase economic activity, increase interest costs (on U.S. government debt) and boost inflation.”

Promises to cut federal spending are “actually quite misleading,” he added, “when you factor in the plans on the tax side and what that’s going to do to the deficit and interest costs.”

Trump’s plan against inflation

Trump’s announced plan to reduce inflation rests on five key pillars: dropping restrictions on domestic energy production, cutting “unnecessary” government spending, easing regulations, cracking down on immigration and “restoring peace” in the world.

The likelihood that Trump will meet those targets remains open. A White House that is more supportive of America’s oil and gas giants won’t persuade them to significantly increase production, Yaros said. But even if all those targets are met, “I don’t think it’s going to have an immediate impact on inflation.”

Republicans say imposing tighter border restrictions and carrying out large-scale deportations will help “reverse” Biden policies that they say have driven up housing, education and health care costs. But economists warn that Trump’s stated immigration plans risk worsening inflation.

“If he’s serious about deporting millions of people in a relatively short period of time, that would lead to big wage increases in those sectors, and a lot of that would be passed on to consumers,” Strain said. “We should expect big increases in the price of fresh produce, hotel rooms and restaurant meals.”