How Trump’s agenda could reignite US inflation

Former President Trump is betting that high gas and grocery prices will fuel his return to the White House. But his second-term plans could make inflation worse.

Why it matters: President Biden’s approval rating has suffered under the crushing weight of inflation, which voters consistently rank as their top issue for the 2024 election.

• Trump, meanwhile, is taking advantage of his non-incumbent status, lobbing grenades from the sidelines as Biden has struggled to bring inflation back to pre-pandemic levels.
• Simmering frustration with high prices has allowed Trump to build a decisive polling advantage on the economy — while some of his own plans have largely escaped scrutiny.

Zoom in: At least four of the main principles of Trump’s economic philosophy carry significant inflationary risks, according to economists and Wall Street analysts.

1. Universal tariffs: In what would likely trigger a massive global trade war, Trump has called for 10% tariffs on all imports, 100% tariffs on cars made outside the US, and a minimum 60% tariffs on Chinese goods.

• An analysis by the Center for American Progress Action Fund, a Democrat-aligned group, found that the 10% tariffs “would amount to a roughly $1,500 annual tax increase for the typical household.”
• In an interview with TIME, Trump disputed that his plans would drive up prices in the US and falsely claimed — as he did throughout his presidency — that tariffs force foreign countries to pay the US

2. Lower interest rates: Trump broke precedent in office by frequently attacking the Federal Reserve for not dramatically lowering interest rates to compete with other countries.

• Hiking interest rates is the Fed’s primary tool for fighting inflation, which is part of its mandate in addition to promoting maximum employment.
• The Wall Street Journal reports that Trump’s allies are drafting plans to gut the Fed’s independence and allow the president to have more influence on the central bank’s rate decisions.

3. Lower taxes: Republicans’ top fiscal priority is extending Trump’s 2017 tax cuts, which would cost $3.3 trillion over the next decade, according to the Committee for a Responsible Federal Budget.

• Tax cuts may make life more affordable for many Americans, but more money in the economy also juices consumer demand — potentially pushing up prices.

4. Limits on immigration: Trump has vowed to carry out the “largest domestic deportation operation in American history,” planning mass detention camps and raids targeting millions of undocumented immigrants.

• Despite the significant backlash Biden has faced for his handling of the border, economists believe last year’s immigration increase allowed the job market to continue booming without adding to inflationary pressures.
• Trump’s deportation plans — while supported by the majority of Americans — could exacerbate labor shortages and reignite inflation.

The plot: Trump’s former trade chief Robert Lighthizer, who is likely to serve in a future administration, wants to devalue the US dollar, Politico has reported. That would be a major shift in currency policy that could send prices of imported goods soaring.

Zoom out: Economic historian and Columbia University professor Adam Tooze warned in a recent podcast that Trump’s positions are a “recipe” for inflationary shocks to the economy.

The other side: Trump’s Agenda47 website outlines plans to use presidential “impoundment” authority to cut out “wasteful and unnecessary” spending by federal agencies, which Trump says will help stop inflation.

• The former president frequently points to his plans to “unleash energy dominance” by expanding oil and gas drilling, which could ease prices at the pump.
• Conservative economists and many business leaders also argue that Trump’s broad deregulatory approach across government would help lower costs for companies — and in turn, their customers.

What they’re saying: “What Trump and his allies are proposing will bring chaos to economic markets, raise costs on working families, and send inflation skyrocketing,” Biden campaign spokesperson James Singer said in a statement.

The bottom line: Trump’s biggest advantage in the inflation debate is his own record: The average annual inflation rate was under 2% for his first term, before COVID wreaked havoc on the economy.

• Nearly 9 in 10 Americans say the economy and inflation will be the most important issues determining who they support for president in November, according to a new ABC News/Ipsos poll.
• Right now, that’s a bad sign for the White House: 44% of Americans trust Trump to handle inflation, while just 30% trust Biden.