LAmericans hated Joe Biden’s inflation; They will hate the one that Donald Trump is cooking for them. Indeed, the Republican candidate’s program, made up of customs duties, massive expulsions of workers and attacks on the independence of the Federal Reserve (Fed), promises to be just as explosive as the mistakes at the start of his term. by Joe Biden. Here comes Season 2 of Inflation.
The first season had left its mark: the Democratic president had decided on an excessive and untimely recovery plan in 2021, while the American economy was rebounding from the Covid-19 pandemic and had two effective vaccines. Combined with the Fed’s zero rate policy, which believed inflation to be temporary, and the disruption of post-Covid supply chains, inflation soared to 9.1% in June 2022. Rising prices generalization of the Biden mandate reaches 20%.
With Donald Trump, it could also be disastrous, as evidenced by a study published on September 26 by the Peterson Institute for International Economics in Washington, a center-left think tank favorable to globalization, which explores three pillars of the promised policy by the Republican candidate.
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The first is the expulsion of the irregular workers who drive American agriculture and industry. The candidate takes the example of a massive removal operation carried out in 1956 by Dwight Eisenhower, who expelled some 1.3 million workers. The high end of the Trump plan is to deport all illegal immigrants, or 8.3 million people. Second axis of the Republican plan, immediately impose a customs duty of 10% on all imports and 60% on those from China, which will increase the prices of imports and penalize American exports if the United States’ partners retaliate .
Screw tightening
Third axis, appoint a president of the Fed, the American central bank, more accommodating than Jerome Powell and meddle in monetary policy, as was the case in the years of stagflation of the 1970s, until the appointment of Paul Volcker in 1979. This decision would be self-fulfilling, with markets anticipating more inflation. All of these measures can be taken quite easily by the president, without major support from Congress, although legal recourse is expected.
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According to calculations by the Peterson Institute, annual inflation would jump to 7.4% in 2026 according to the black scenario (massive expulsions, trade responses from partners of the United States) and to 4.1% according to the pink scenario (few responses and expulsions limited to 1.3 million people). Gross domestic product would grow less than expected during the Trump mandate, by almost 10%, or $2,570 billion at the end of 2028, in the black scenario, or by 2.8%, or $750 billion, in the optimistic scenario. . Finally, total U.S. employment would fall by 1.1% to 6.7% by the end of 2028, depending on the number of workers deported.
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