Reducing inflation has been a key campaign issue for former president Donald Trump.
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According to the latest data from the U.S. Bureau of Economic Analysis, Americans have, on average, more money in their wallets than they did in June. However, those numbers don’t mean consumers think that grocery, gas, and daily essentials are more affordable.
Wayne Winegarden, an economist at the Pacific Research Institute, said Trump’s policies to help working families will only succeed if they improve economic growth and reduce inflationary pressures.
GOBanking Rates spoke to economists about four reasons Americans should trust Trump to bring down inflation.
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Fewer Regulatory Barriers
A second Trump term would likely mean rolling back Biden-era corporate regulations to reduce what Trump views as “government overreach.”
“We see former president Trump signal here that there will be efforts to diminish corporate regulations,” said Joel Griffith, an economist with the Heritage Foundation. “This will increase the number of goods and services and help costs become more affordable.”
Specifically, Trump said deregulating the energy and manufacturing sectors was essential to boosting economic growth and creating jobs. Trump also promised to end current environmental regulations on businesses, which he said hindered operations and economic competitiveness.
Griffith said companies faced “voluminous regulations from the Biden-Harris Administration,” which are costing some companies as much as $40,000 per job.
However, deregulation has hidden costs for consumers. It might also lead to higher health costs related to environmental deregulation and clean-up.
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Continuing ‘Trump Tax Cuts’
Unless Congress extends them, Trump’s 2017 tax cuts will expire at the end of next year. Trump said he would make the tax cuts permanent if re-elected.
Officially known as the Tax Cuts and Jobs Act (TCJA), the reforms included:
The changes sought to stimulate economic growth during the pandemic by giving consumers and companies more disposable income, but the tax reforms come with a cost.
“If the Trump tax cuts end, that will result in every family having less take home pay,” Griffith said. “If those tax cuts disappear in the beginning of 2026, they (taxpayers) will see their after-tax earnings decrease by 3 to 4 percentage points.”
Griffith said ending the Trump-era tax cuts could increase corporate taxes, whose costs would likely be passed on to consumers. In addition, there would be fewer dividends available for stockholders.
Trump Tariffs
During his first term, Trump backed high tariffs on imported goods and proposed imposing tariffs ranging from 10% to 20% on nearly all imported goods.
The former president said increasing tariffs would protect American companies from unfair foreign competition, equalize America’s position in foreign trade deals, and protect American jobs.
Griffiths said that while tariffs are a form of tax, inflation is price increases “across the board.” Increasing foreign tariffs, including Trump’s plan to increase Chinese tariffs by as much as 60%, would undo the impact of Trump’s 2017 tax cuts.
Other economists say Trump’s tariffs could contribute to inflation by making imported goods more expensive. Industries that rely on global supply chains could pass those costs onto consumers, leading to higher prices on a broad range of products.
“The problem with tariffs is that they will be inflationary and weaken growth and that would also be inflationary,” Winegarden said.
Pumping Up the Fossil Fuels Industry
Trump said increasing domestic oil and gas production will lower gas prices–in other words, “Drill, baby, drill.”
Lower energy prices by making more oil and gas could reduce costs for consumers and businesses. Lower transportation and manufacturing costs could reduce inflationary pressures and lower consumer prices.
“We can look to the successes from the last Trump Administration,” Griffith said. “It signals to the markets that we’re friendly to expanding affordable fuel supplies.”
Griffith explained, “We often take affordable energy for granted. If you look at California, their gas prices are often triple the cost.”
Crude oil production in the United States is at record-breaking levels. According to the U.S. Energy Information Administration, the U.S. averaged 12.9 million barrels a day last year, beating America’s previous global record of 12.3 million set in 2019.
Lowering the Interest Rates
If re-elected, Trump has promised to encourage the Federal Reserve to lower interest rates.
While the Federal Reserve operates independently, Trump said the agency needed to lower interest rates quickly enough during his first term. Continued pressure could mean lower interest rates and the encouragement of spending and borrowing, which could stimulate economic growth.
Nevertheless, lowering the interest rates is like walking a tightrope. If the economy is already rapidly growing, demand could outstrip supply, leading to inflation.
“We (the federal government) are spending so far beyond our means,” Griffith said. “Raising the interests rates is done to contain the damage. The Federal Reserve has to increase rates to diminish the demand to stop dollars from multiplying.”
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. For more coverage on this topic, please check out I’m an Economist: 4 Reasons Americans Should Trust Kamala Harris To Bring Down Inflation.
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This article originally appeared on GOBankingRates.com: I’m an Economist: 4 Reasons Americans Should Trust Trump To Bring Down Inflation
