“Chaotic.” “It’s devastating.” “It’s a big hit to people’s wallets.”
Three economists in various policy fields say that if Republican presidential candidates follow through on the two major policies they promised on the campaign trail: massive tariffs and mass deportations, they would be much more likely to do so under a second Trump administration. This is what the economy will look like.
They say Americans will face higher prices and product shortages due to tariffs, while consumer spending will suffer, jobs will go unfilled and local economies dependent on immigrants will suffer.
To varying degrees, these experts all agree that under these policies the economy will move in the same direction: the wrong direction.
Republican presidential candidate and former President Donald Trump speaks at Trump Tower in New York on September 26th (Seth Wenig) (ASSOCIATED PRESS)
“Empty warehouse and empty shelves”
In response, the former president called for a 60% tariff on goods imported from China and a flat rate of 10% to 20% on all remaining goods imported from other countries. This is an expansion of what President Trump imposed during his first term, when his tariffs affected about $300 billion of imported goods, said Wendy Edelberg, a senior economic research fellow at the Brookings Institution. (some of which Biden did not retract). A centrist think tank.
“Imagine that happening to 10 times that amount of economic activity,” Edelberg said, noting that imports are worth $3 trillion. “What you’re about to see is chaos.”
Edelberg said U.S. companies that rely on imports are scrambling to negotiate contracts over who will bear the cost of tariffs, finding other exporters who offer lower prices, and having to deal with the costs of imports in the U.S. At the same time, they will be trying to procure products. Some people will be successful. Many people don’t. And Americans may find that some of the products they want are unavailable.
“You’re going to find empty warehouses and empty shelves for a while,” Edelberg said.
Read more: What is a tariff? How does it affect you?
A worker operates a forklift near shipping containers stacked at the Port of Los Angeles on September 20. (Photo by Mario Tama/Getty Images) (Mario Tama via Getty Images)
The price of goods will also rise. According to these three economists, that’s indisputable.
Not only will the price of imported goods increase, but the price of U.S. products will also increase if imported materials are used to make them. U.S. companies will simply pass on some of the tariffs to shoppers, which is “a big hit in people’s pockets,” said Dean Baker, senior economist at the liberal Center for Economic Policy Research.
U.S. companies could also raise prices even if they are not affected by tariffs.
“When companies make pricing decisions, they look at what their competitors are doing,” Baker said.
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Therefore, if the price of imported widgets increases due to tariffs, US companies manufacturing widgets in the US will be less attractive to consumers by comparison because they can raise their prices. there is no.
The price of our services may also increase. Let’s go to the beauty salon. If many salons use imported hair color, but supply chain disruptions make it unavailable, customers will flock to the one salon that uses U.S.-made hair color.
“Beauty salons where you can actually dye your hair are now the only playgrounds in town, so there’s a good chance they’ll drive up prices,” Edelberg said.
“It’s totally irresponsible.”
Overall, a 10% tariff would increase inflation by 1 percentage point, costing the average U.S. household $2,600 a year, according to the Peterson Institute for International Economics, Goldman Sachs’ chief economist said. I’m predicting.
“That would be extremely burdensome for families with limited budgets and limited incomes,” said Desmond Luckman, a senior fellow at the conservative American Enterprise Institute.
And that price increase isn’t evenly distributed. Products with the most disrupted supply chains may see higher prices.
“For certain products in certain categories, you can imagine price increases similar to what we’ve seen during COVID-19,” Edelberg said.
Another ripple effect of these tariffs is that the United States will face retaliation from other countries that it cannot afford to sit idly by. For example, when President Trump enacted tariffs during his first term, affected countries targeted specific U.S. industries with their own tariffs, such as Kentucky Bourbon and Harley-Davidson.
“This is a really destructive policy,” Lachman said. “That’s completely irresponsible.”
Creations Market owner Philomene Philostine, a naturalized Haitian-American citizen, stocks shelves with products primarily aimed at Haitian residents at her store in Springfield, Ohio, on Sept. 13. (Photo provided by: ROBERTO SCHMIDT/AFP via Getty Images) (ROBERTO SCHMIDT) via Getty Images)
“There will be less growth.”
Phew. And that’s just a tariff.
President Trump is also calling for the deportation of 10 million to 20 million illegal immigrants. And there’s a lot of confusion about who is considered illegal. President Trump’s running mate, J.D. Vance, said immigrants granted legal status under the Biden administration would also be deported.
Apart from the logistics and vast sums of money needed to carry out deportations, not to mention the humanitarian crisis, this policy would strain the workforce of many major industries. Immigrants, both documented and undocumented, make up a large portion of the workforce in agriculture, construction, services, and manufacturing.
A sudden shortage of workers makes it difficult for businesses to produce goods or provide services, causing further inflation.
“If we really deported about 30% of the agricultural workforce, there’s no way food prices wouldn’t go up, probably by a significant amount,” Baker said.
Edelberg expects many immigrants, even those who were here legally, will leave voluntarily as the country becomes unlivable. All of them will take home millions of dollars in personal spending.
“Immigrants demand things, and immigrants provide the labor that supplies them. As an economy grows, these things fundamentally go hand in hand,” she says. “So there will be less immigration. That just means less population growth.”
Local economies with large immigrant populations will be particularly hard hit by deportations. Imagine, Edelberg said, the owner of a local pizza restaurant who decides to expand and takes out a loan to buy a new pizza oven.
“And now they’re expanding, they’re in debt, they’re paying more rent, but they have no customers,” she said. “That’s very hurtful to the local economy.”
“Really rough sledding”
How bad will the economy get? Three economists are divided.
Mr. Edelberg offered the brightest of the gloomy forecasts. Taken together, the impact of tariffs and deportations will “significantly reduce economic growth,” he said, estimating a 1-1.5 percentage point reduction in gross domestic product.
That might not be enough to send us into a recession, she said, and Ruckman said that outcome was very likely.
“If Trump is elected and we do what he says, we’re going to have a very tough slide over the next four years,” Luckman said.
Former Pennsylvania Sen. Pat Toomey, a Republican, issued a dire warning to Semaphore this month that President Trump’s tariffs would lead to “Depression-era” job losses. Lachman thinks that’s a step too far, but Baker has a different opinion.
“I think that’s a very plausible story,” he said.
“If you create all kinds of instability in the economy by high tariffs, by deporting a large part of the workforce and not letting it in any more, if you cut off the factors that make the economy flexible, it becomes very difficult to create inflation. Be down when it starts. ”
Janna Herron is a senior columnist at Yahoo Finance. Follow her on X @JannaHerron.
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