Trump tariffs, tax cuts and interest rates likely to fuel inflation, Wall Street and economists agree

Former President Donald Trump is building a second-term economic agenda that analysts say could reheat the very inflation that he has slammed President Joe Biden for creating.

“I call it a ring around the country. We have a ring around the country,” Trump said in a Time magazine interview released Tuesday, referring to aggressive tariffs he has promised to impose in a second term. “I also don’t believe that the costs will go up that much.”

The presumptive Republican presidential nominee has repeatedly pledged to hike tariffs, cut taxes and encourage cheap money policy if he wins the November election.

Yet economists and Wall Street analysts agree that these plans would likely drive consumer prices higher.

Trump has outright dismissed this idea: “I don’t believe it’ll be inflation. I think it’ll be lack of loss for our country,” he said in the Time interview.

Trump has pledged to raise tariffs by 10% on imports across the board, and push them even higher — to between 60% and 100% — for China and Mexico.

He also wants to extend his first-term tax cuts, which raised deficits when they were first implemented and are due to expire in 2025.

“I will make the Trump Cuts permanent … and we will cut your taxes even more,” Trump said at a February rally in South Carolina.

Plus, Trump has signaled his intent to replace Federal Reserve Chairman Jerome Powell and then to pressure the next Fed chair to lower interest rates. Trump allies have also been working on plans to force the Fed to consult Trump on interest rate decisions, according to a Wall Street Journal report.

Analysts view these proposals as threats to inflation’s rocky road back down to the commonly accepted ideal level of around 2%.

“A second Trump term could bring higher tariffs, attempts to weaken the dollar, even higher deficits, deportation of illegal immigrants, and other policies that could put upward pressure on inflation,” Piper Sandler analysts wrote last week.

“Most of the major policy initiatives being suggested by Donald Trump’s campaign would be inflationary,” Paul Ashworth, Capital Economics’ chief North America economist wrote Monday. “Whether it’s narrowing the trade deficit via tariffs or a dollar devaluation, curbing immigration or, now we learn, compromising the Fed’s independence.”

Updated: —