Key Point: “Most economists think inflation, interest rates and deficits would be higher under the policies former President Donald Trump would pursue in a second administration than under those proposed by Vice President Kamala Harris, according to a quarterly survey by The Wall Street Journal.”

Wall Street Journal: Economists Say Inflation, Deficits Will Be Higher Under Trump Than Harris

By: Paul Kiernan and Anthony DeBarros

• Most economists think inflation, interest rates and deficits would be higher under the policies former President Donald Trump would pursue in a second administration than under those proposed by Vice President Kamala Harris, according to a quarterly survey by The Wall Street Journal.
  
• The upshot: Economists still say Trump’s policies are more likely to add to inflation, deficits and interest rates. If anything, the margin has grown since July.

• Of the 50 economists who responded to the survey’s question on inflation, 68% said prices would rise faster under Trump than under Harris. That was up from 56% in July. 

• Since July, Trump has pledged across-the-board tariffs of 10% to 20% on imported goods, up from his earlier plan to impose 10% tariffs. He has also proposed a 60% or higher tariff on imports from China.

• Studies of tariffs imposed in his first term found they were often passed through to importers or consumers as higher costs or prices and hurt industries that depend on imported inputs. 

• “If the tariffs work the way economists think they work, I think people are in for a very nasty surprise,” said Philip Marey, senior U.S. strategist at Rabobank. 

• The Journal’s survey asked economists how Trump’s proposed broad-based tariffs would affect domestic manufacturing employment within three to five years, relative to a scenario with no such policy. Of the 44 economists who responded, 59% said employment would be lower, while only 16% said it would be higher. The remainder said employment would be the same.

• As a result, the Committee for a Responsible Federal Budget estimates Trump’s plans would widen federal budget deficits by $7.5 trillion over the next decade, more than twice the expected increase under Harris. 

• A likely consequence of higher deficits and inflation is higher interest rates. The Journal’s survey showed 61% of economists saw rates being higher under a hypothetical President Trump than under Harris.

• Particularly reassuring, several economists said, was a large upward revision by government statisticians to the estimated share of personal incomes that are being saved. The revision showed U.S. households squirreled away $454 billion more in July than previously believed. Since consumer spending drives about two-thirds of economic output, a higher saving rate suggests the expansion has legs to run further.

• “The U.S. economy is showing surprising resilience,” said Dana Peterson, chief economist at the Conference Board.