President-elect Donald Trump's proposed economic policies for a potential second term could trigger higher inflation, according to economic experts, despite his promises to lower prices for American consumers.
What Happened: Three key proposals are raising concerns among economists: a universal tariff of up to 20% on imports (with China facing up to 60%), mass deportation of undocumented immigrants, and tax cuts, reported Business Insider.
Major retailers are already warning about price impacts. "If we get tariffs, we will pass those tariff costs back to the consumer," AutoZone CEO Philip Daniele said during a recent earnings call. Columbia Sportswear CEO Timothy Boyle echoed similar concerns, stating it would be "very difficult to keep products affordable."
The proposed deportations could disrupt labor markets, particularly in construction and agriculture, forcing wage increases that companies may offset through higher prices. "It's pretty clear... you reduce the labor supply very abruptly, and you're going to get an increase in inflation," said economist Wendy Edelberg, according to the report.
The bond market is already reacting, with yields surging and market-based inflation expectations reaching their highest level since April. Economist Veneta Dimitrova of Ned Davis Research noted these movements reflect "legitimate worries about the path of government spending."
Why It Matters: The potential inflationary impact of Trump's policies is a significant concern for investors and economists. A report highlights the market's focus on predicting which of Trump's campaign promises will translate into policy actions. While lower corporate taxes and deregulation are seen as economic positives, immigration clampdowns and high tariffs pose potential challenges.
Furthermore, Obama-era economist Jason Furman has expressed skepticism about the Federal Reserve's inflation outlook, warning of persistent risks.
Interestingly, China experts suggest that while Trump's tariffs may initially hurt China's economy, they could ultimately align with Beijing's long-term strategic goals.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
