President-elect Donald Trump has vowed to overhaul the economy with a series of policy changes, including tariffs on foreign goods and tax cuts for individuals and businesses. However, many economists warn that these policies could lead to higher inflation, drive up federal debt, and eventually slow economic growth.
The centerpiece of Trump’s agenda is taxing imports, which could become a tax on consumers. The proposed 60% tax on Chinese goods and a universal tax of 10% or 20% on all other imports would likely impose an after-tax loss of $2,600 annually on a typical American household. Other countries may retaliate with tariffs on American goods, hurting U.S. exporters.
Deportations of undocumented immigrants could also have a significant impact on the job market. The Congressional Budget Office reported that net immigration reached 3.3 million in 2023, filling labor gaps and allowing companies to hire workers without overheating inflation. However, Trump’s plan to deport all 8.3 million immigrants believed to be working illegally in the United States could slash U.S. GDP by $5.1 trillion and raise inflation by 9.1 percentage points.
Big tax cuts are also a major concern, with estimates suggesting that they would increase budget deficits by $5.8 trillion over 10 years. The federal budget is already out of balance due to an aging population and past tax cuts. While Trump’s plan may generate enough growth to recoup some lost tax revenue, it is unlikely to bring the federal budget meaningfully closer to balance.
Many experts worry that Trump’s lack of appetite for making tough spending cuts or increasing taxes will hinder his ability to achieve fiscal responsibility. “It’s not going to happen,” said economist Kimberly Holtz-Eakin. The economy faces significant challenges, and many are concerned that Trump’s policies could exacerbate these problems rather than solve them.
Source: https://apnews.com/article/economy-trump-inflation-prices-election-tariffs-immigrants-e791d15158195a8a15a71ee43c77d749