Economists Warn Trump Policies Would Stoke Inflation

Inflation has dominated the conversation in economic circles these past few years—but it’s also been a key political concern in elections from Argentina to India and now, of course, the US—where the perception of progress is increasingly tied to ideology rather than data. The Federal Reserve is widely expected to cut interest rates in September amid growing expert confidence that the runway is near. The Fed’s preferred inflation gauge has eased to 2.6%, not far off its 2% target, and the once overheated labor market has cooled to pre-pandemic levels. The rebalancing has been accompanied by moderation in consumer spending, as high prices and borrowing costs tamp demand and thus price pressures. And while that coveted economic soft-landing is in sight, the Fed made clear it’s walking a tight rope. “We don’t want to be to a point where we start to see the labor market weaken substantially—to falter—because by then, it is actually often too late to bring it back,” San Francisco Fed President Mary Daly said this week.

Democrats have boasted of the humming US economy, years of low unemployment and the near-victorious fight to crush inflation as the envy of the world. But the data and the message often fall flat with followers of Donald Trump. To be sure, Americans of all political stripes are still paying more for goods then before the pandemic. But while the GOP has been trying to blame Biden for residual inflation, it’s Trump’s plans that could undo the Fed’s hard-fought progress. Economists are warning that his policies—another round of tax cuts Democrats say will go to the rich, across-the-board tariff hikes to trigger another China trade war, and curbs on immigration that Republicans blocked earlier this year—will wreak havoc on global trade and send inflation right back up again.