December 25, 2024

Republican presidential candidate and former President Donald Trump speaks to guests during a rally at Clinton High School in Clinton, Iowa, on January 6, 2024.

Scott Olson | Getty Images News | Getty Images

Former President Donald Trump is laying out a second-term economic agenda that analysts say could exacerbate inflation that he blasts President Joe Biden for.

“I call it a ring around the country. We have a ring around the country,” Trump said in an interview with Time magazine published Tuesday, referring to his pledge to impose taxes during his second term. aggressive tariffs. “I also don’t believe the costs are going to go up that much.”

The Republican presidential candidate has repeatedly promised to raise tariffs, cut taxes and encourage cheap monetary policy if he wins the November election.

Economists and Wall Street analysts agree, however, that the plans could push up consumer prices.

Trump completely dismissed that notion: “I don’t believe it’s going to be inflationary. I don’t think it’s going to cost our country,” he told Time magazine.

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Trump promises to increase Increase import tariffs across the board by 10%, and push tariffs in China and Mexico to 60% to 100%.

He also wants to extend the first tranche of tax cuts, which increased the deficit when first implemented and are set to expire in 2025.

“I’m going to make the Trump tax cuts permanent… We’re going to cut taxes even more,” Trump said at a rally in South Carolina in February.

In addition, Trump has expressed his intention to replace the chairman of the Federal Reserve Jay Powell Then put pressure on the next Fed chairman to lower interest rates. According to the Wall Street Journal, Trump’s allies have also been formulating plans to force the Federal Reserve to seek Trump’s opinion on interest rate decisions.

Analysts see the proposals as a threat to the bumpy road to inflation back to the generally accepted ideal level of around 2%.

“A second Trump term could bring higher tariffs, an attempt to weaken the dollar, even higher deficits, deportation of illegal immigrants and other possible consequences for the economy,” analysts at Piper Sandler wrote last week. Policies that put upward pressure on inflation.

“Most of the major policy initiatives proposed by the Donald Trump campaign will be inflationary,” said Paul Ashworth, chief economist for North America at Capital Economics. wrote on Monday. “Whether it’s narrowing the trade deficit through tariffs or a weaker dollar, restricting immigration or, as we now learn, undermining the independence of the Federal Reserve.”

On the tariff front, Wall Street analysts point out that companies are passing on higher import costs to customers by raising prices.

Trump flatly rejected the idea at the meetinge Time magazine interview. “A lot of people say, ‘Oh, it’s going to be a tax on us.'” I don’t believe it’s a tax on the country (exporting) it.

Wells Fargo analysts wrote in a report in early April that Trump’s tariff policy “would be a significant upgrade to existing trade policy and would further increase costs for U.S. importers, put upward pressure on inflation and potentially The U.S. dollar strengthens.”

But analysts at Wells Fargo added that the impact of inflation “is likely to be partially absorbed in the near term,” explaining that many suppliers have begun diversifying inventories away from “products affected by tariffs.”

Wells Fargo’s report said Trump-era tariffs on China nearly sparked a trade war but had only a “marginal” impact on the economy: “The surge in consumer price inflation is largely attributable to the damage from the pandemic, not The impact of the trade war.

Reached for comment, the Trump campaign said, “Under President Trump, inflation is non-existent, gas is cheap, groceries are affordable, and the American Dream remains alive.”

Inflation is fierce

While core elements of Trump’s agenda pose an inflationary threat, Polls have consistently found that voters trust Trump more than Biden when it comes to lowering the cost of living and controlling inflation.

In part, voters’ nostalgia for the Trump economy is a byproduct of the scars left by post-pandemic inflation.

In January 2017, after Trump took office, consumer price indexA key indicator of inflation, the annual rate is 2.51%. That number has declined during his administration, and by the time Biden took the Oval Office, the 12-month inflation rate was 1.40%.

By the summer of 2022, the Consumer Price Index (CPI) had soared to about 9% year-on-year, driven largely by a conflict between pent-up consumer demand and global supply chains that were unable to deliver products fast enough. Since then, the CPI has cooled down, falling to 3.48% in March this year.

But inflation over the past five years appears to have left many voters with painful memories of Biden’s economy.

It also thrusts a data point typically tracked only by economists into the minds of voters and introduces it to a new generation.

The last time inflation exceeded 9% was 1981. For others, this kind of inflation has no precedent in their adult lives.

Biden faces the difficult task of convincing voters that their lives are better because of his economic achievements, including low unemployment ratecontinued Gross Domestic Product Growth and historic clean energy invest.

In recent months, Biden has also taken a more aggressive stance on potential trade restrictions with China. In early April, Biden said he wanted to triple tariffs on imported Chinese steel and aluminum.

But as Biden makes his economic case to voters, Trump has used the past few months of worrying economic data to lambast his opponent and the Federal Reserve.

“Inflation is back and it’s bad!” Trump wrote in an article truth society Published in early April. “The Fed can never credibly lower interest rates because they want to protect the worst president in American history!”

It’s unclear what the former president meant, especially given that Powell is a lifelong Republican who was appointed by Trump.

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