WASHINGTON – Fed up with high prices and unimpressed by an economy that, by any measure, is a a healthy oneAmericans demanded change when they voted for president.

He could get it.

President-elect Donald Trump has promised to reverse many of the economic policies of the Biden administration. trump card he campaigned on promises impose huge tariffs on foreign goods, cut taxes on individuals and businesses, and deport millions of undocumented immigrants working in the United States.

With their votes, tens of millions of Americans expressed confidence that Trump can restore the low prices and economic stability they remember from his first term — at least until the 2020 COVID-19 recession crippled the economy and then a strong recovery led to increased inflation. . Inflation has since declined and is back to near normal. However, Americans are frustrated by still high prices.

“His recovery has been generally positive and people look back and think, ‘Oh, OK. Let’s try this again,” said Douglas Holtz-Eakin, a former White House economic adviser, director of the Congressional Budget Office and now president of the conservative think tank American Action Forum.

Since Election Day, the Dow Jones Industrial Average grew exponentially more than 1,700 points, largely on expectations that tax cuts and a broad loosening of regulations will accelerate economic growth and boost corporate profits.

Maybe they will. However, many economists warn that Trump’s plans are likely to do so exacerbates inflation promised to eradicate, increase the federal debt and ultimately slow growth.

Trump’s policies could boost inflation

The Peterson Institute for International Economics, a major think tank, he estimated that Trump’s policies would reduce U.S. gross domestic product — the total output of goods and services — by between $1.5 trillion and $6.4 trillion by 2028. Peterson also estimated that Trump’s proposals would lead to two-year price spike: Inflation, which would otherwise come in at 1.9% in 2026, would instead rise between 6% and 9.3% if Trump’s policies were enacted in totality.

Last month, 23 Nobel Prize winning economists signed a letter warning that a Trump administration “will lead to higher prices, higher deficits and higher inequality.”

“Among the most important determinants of economic success,” they wrote, “are the rule of law and economic and political certainty, and Trump threatens all of these.”

Trump inherits an economy that, despite frustratingly high prices, looks fundamentally strong. Growth came in a healthy way Annual rate of 2.8%. from July to September. Unemployment is 4.1% — quite low by historical standards.

Among rich countries, only Spain will experience faster growth this year, according to the International Monetary Fund forecast. The United States is “the economic envy of the world,” the Economist magazine recently declared.

The Federal Reserve is so confident that US inflation is slowing toward its 2% target that it reduce the reference rate in September and again this week.

Americans are deeply dissatisfied with prices

Consumers, however, still bear the scars of inflationary growth. Average prices they are still 19% higher than they were before inflation started to accelerate in 2021. Food bills and rising rents continue to cause hardship, especially for lower-income households. Although Inflation-adjusted hourly wages rose for more than two years, they are still below where they were before President Joe Biden took office.

Voters took their frustration to the polls. Conformable AP VoteCast, a broad survey of more than 120,000 voters nationwide, 3 in 10 voters said their family was “falling behind” financially, up from 2 in 10 in 2020. About 9 in 10 voters were at least concerned about the cost of food, 8 in 10 about the cost of health care, housing or gas.

“I don’t think it’s deep or complicated,” Holtz-Eakin said. “The real issue is that the Biden-Harris team made people worse and they were very angry about it, and we saw the result.”

The irony is that mainstream economists fear that Trump’s remedies will make the price level worse, not better.

Tariffs are a tax on consumers

The centerpiece of Trump’s economic agenda is taxation of imports. It’s an approach he says will reduce America’s trade deficits and force other countries to make concessions to the United States. In his first term, he raised tariffs on Chinese goods, and now he has promised much more of the same: Trump wants to raise tariffs on Chinese goods to 60% and impose a “universal” tax of 10% or 20% on all other. imports.

Trump insists other countries pay tariffs. Actually, American companies pay them — and then usually pass the higher costs on to their customers through higher prices. That’s why taxation of imports is normally inflationary. Worse, other countries usually retaliate with tariffs on American goods, hurting American exporters.

Kimberly Clausing and Mary Lovely of the Peterson Institute calculated that Trump’s proposed 60 percent tax on Chinese imports and his 20 percent tariff on everything else would impose an after-tax loss on the typical American household of $2,600 annually.

The economic damage would likely extend globally. Capital Economics researchers calculated that a 10% US tariff would hurt Mexico the most. Germany and China would also suffer. All of this depends, of course, on whether he actually does what he said during the campaign.

Deportations would shake up the US labor market

Trump has threatened it deport millions of undocumented immigrantspotentially undermining one of the factors that allowed the United States to control inflation without going into recession.

The Congressional Budget Office reported that net immigration — arrivals minus departures — reached 3.3 million in 2023. Employers needed new arrivals. After the economy recovered from the pandemic recession, companies struggled to hire enough workers, especially as so many native-born baby boomers were retiring.

Immigrants filled the void. In the past four years, 73% of those entering the labor force are foreign-born.

Economists Wendy Edelberg and Tara Watson of the Brookings Institution Hamilton Project found that by increasing the supply of workers, the influx of immigrants allowed the United States to generate jobs without overheating and accelerating inflation.

The Peterson Institute calculates that deporting all 8.3 million immigrants believed to be working illegally in the United States would reduce US GDP by $5.1 trillion and increase inflation by 9.1 percentage points by 2028.

Big tax cuts could swell the federal deficit

Trump proposed extending the 2017 tax cuts for individuals that were set to expire after 2025 and restoring tax breaks for businesses that were cut. He also called for an end to taxes on Social Security benefits, overtime pay and tips, as well as further reductions in the corporate income tax rate for American manufacturers.

The Penn Wharton Budget Model of the University of Pennsylvania estimates that Trump’s fiscal policies would i increasing budget deficits by 5.8 trillion dollars over 10 years. Even if the tax cuts generated enough growth to recoup some of the lost tax revenue, Penn Wharton calculated, deficits would still grow by more than $4.1 trillion from 2025 to 2034.

The federal budget is already unbalanced. An aging population has required increased spending on Social Security and Medicare. And past tax cuts have reduced government revenue.

Holtz-Eakin said she worries that Trump has little appetite to take the steps — cuts to Social Security and Medicare, tax hikes or a combination — needed to bring the federal budget closer to balance.

“It’s not going to happen,” Holtz-Eakin said.