President Donald Trump won re-election largely due to Americans’ frustration with the higher cost of living under President Joe Biden. However, experts like Mark Zandi say his policies may drive prices up rather than down.
Under Biden’s leadership, essential items like groceries and housing saw significant price hikes. In contrast, voters focused on the difficulties in making ends meet, making it hard to care about the reasons behind the price increases or moderation in inflation.
Trump has emphasized how his economic policies will bring down living costs for Americans. Nevertheless, experts are skeptical about the effectiveness of these policies. The administration plans to introduce tariffs across countries and products, which would lead to higher prices on imported goods.
Markets learned from Trump’s first term that tariffs almost entirely increase prices for consumers. Broad-based tariffs would exacerbate this issue. Furthermore, retaliatory measures by other countries could harm American farmers and manufacturers.
Immigration policies are another aspect of Trump’s agenda, focusing on deporting immigrants to lower housing costs. However, this approach has its drawbacks, as immigrant workers contribute significantly to the construction trade and agriculture. Replacing them would be costly and may not directly lead to lower housing costs.
Trump also aims to reduce energy costs by increasing global oil production. Nevertheless, the president’s efforts could have unintended consequences, such as incentivizing US frackers to produce less oil if prices drop globally. Natural gas prices are on the rise due to increased exports to Europe and Asia.
The administration’s proposal for lower interest rates may also backfire. Lowering rates would stoke inflation, which contradicts the Federal Reserve’s goals of full employment and low and stable inflation.
While some policy steps could help with cost of living, they depend on various factors aligning. Cutting corporate tax rates and easing regulations might benefit consumers, but the overall impact is uncertain due to budget deficits and long implementation times.
In conclusion, Trump’s policies may not have a significant positive impact on the cost of living. Experts believe that the administration’s efforts could lead to increased prices for goods and services, rather than decreased costs.
Source: https://www.inquirer.com/economy/trump-prices-inflation-deportations-tariffs-interest-rates-20250131.html