Donald Trump’s proposed economic policies, as he embarks on his new term, are drawing widespread concern from economists and experts who predict significant negative impacts on the U.S. economy. These policies include substantial tariffs on imported goods, the potential permanence of controversial tax cuts, and the initiation of the largest deportation program in American history. With such sweeping changes on the horizon, the effects could be felt across various sectors of society.
According to economists from the University of Chicago Booth School of Business, 100% of those surveyed oppose Trump’s call for a universal tariff of up to 20%, asserting, "Imposing tariffs results in a substantial portion of the tariffs being borne by consumers of the country... through price increases." This commentary succinctly captures the consensus among financial experts who warn of the potential for rising consumer prices as importers pass on the cost of these tariffs—essentially taxes on imports—directly to American shoppers.
Trump’s plans would include imposing a 25% tariff on imports from Mexico and Canada and rising duties on Chinese imports. These tariffs threaten to raise the costs of everyday goods significantly. Notably, expansive research conducted by the Peterson Institute for International Economics indicates these tariff proposals would diminish the purchasing power of the typical middle-income family by about $1,700 annually, effectively reducing their real income by 2.7%. The lowest-income households may be at greater risk, facing income reductions of approximately 4.2%."
While Trump has often touted these tariffs as beneficial, insisting they will boost local manufacturing, the reality is stark. Retaliatory tariffs could lead to job losses, as shown by studies conducted following previous trade wars initiated by Trump's administration, which determined: "Retaliatory tariffs were more effective in reducing employment than import tariffs were in boosting employment." This creates a troubling scenario where American jobs could be on the line, all under the guise of protecting domestic industries.
Trump's economics is not just about tariffs; it also encompasses his earlier tax cuts, initially passed under the Tax Cuts and Jobs Act of 2017, which dramatically reduced corporate tax rates. With many of these cuts set to expire by 2025, Trump proposes to extend them indefinitely. Again, economists echo concerns, with 85% opposing the permanence of these tax cuts, which largely benefit the wealthiest Americans. One analysis by the Tax Policy Center indicated very little of the benefits trickled down; instead, the "majority of the benefits (54.6%) went to the richest 10% of taxpayers," highlighting the inequity at the core of these policies.
Many economists argue these tax cuts have not catalyzed the promised growth. Real nonresidential fixed investment saw only marginal gains post-tax cuts before tapering again. Short-term corporate profits surged, but this did not result in sustained economic growth or widespread wage increases for middle and low-income earners. Economists Leonard Burman and Joel Slemrod contend, "Cutting taxes by itself will not guarantee economic growth," drawing attention to the minimal correlation between tax reductions and expansive economic progress.
Alongside his tax and tariff measures, Trump has vowed to enact the largest deportation program the country has ever seen, which Bloomberg Economics estimates could shrink the U.S. GDP by as much as 7.9% by 2028. The potential for lost economic output due to his deportation plans sends alarm bells ringing through the economic community. Trump’s promises about immigration disregard the empirical evidence showing immigrant contributions to economic growth, as noted by various studies—including assertions from esteemed economists like George Borjas, who found immigrants generate $1.6 trillion for the U.S. economy each year.
Following through with mass deportations could create significant labor shortages, particularly affecting sectors heavily reliant on immigrant workers, from agriculture to technology. This would inherently lessen economic dynamism and production capability, leading economists to stress the need for comprehensive immigration reform rather than punitive measures. "For every tariff, there will be a response in kind," warned Mexico's President Claudia Sheinbaum, indicating broader repercussions on international trade relationships.
Looking forward, the combination of Trump’s proposed tariffs, the renewal of tax cuts, and the mass deportation of undocumented immigrants projects dire consequences for the economy. The collective assessments reveal potential GDP reduction reaching 8.9% by 2028, dwarfing even the economic downturn experienced during the Great Recession of 2008–2009. Should these policies come to fruition, they could reverse the economic recovery efforts seen over the past decade.
To mitigate this impending economic catastrophe, many argue against Trump’s measures, advocating instead for integrating undocumented immigrants more deeply within the economy and providing them with legal status. Effectively, these resolutions could empower all workers to insist on their rights and promote broader economic growth.
Trump’s economic policies, marked by high tariffs, regressive tax cuts, and aggressive deportation actions, could bring about severe challenges for the American economy. The divergent perspectives of economists illuminate not just the risks involved but the collective call for reasoned policies prioritizing economic inclusion over exclusion.