Most economists surveyed by The Wall Street Journal anticipate that a second term for Donald Trump would lead to higher inflation, interest rates, and federal budget deficits than under a Kamala Harris administration. This sentiment has strengthened since a July survey, with 68% of economists now believing prices would rise faster under Trump, an increase from 56% previously. Only 12% thought inflation would be higher under Harris.
The shift in economists' views is largely attributed to Trump's updated tariff proposals. He has recently pledged across-the-board tariffs of 10% to 20% on imported goods, escalating from an earlier 10% plan, and a 60% or higher tariff on imports from China. Studies from his first term indicated that tariffs often resulted in higher costs for importers and consumers, negatively impacting industries reliant on imported materials. For example, a 2018 internal Fed study concluded that a 10% increase in tariffs by the U.S. and its trading partners could boost inflation by about 1.5 percentage points and reduce economic growth by 1 percentage point for a year. Morgan Stanley estimated that a 60% tariff on China and 10% on other countries could increase consumer prices by 0.9% and cumulatively lower economic output by 1.4%.
Regarding fiscal policy, 65% of economists believe Trump's proposed policies would exert greater upward pressure on the federal deficit, up from 51% in July. 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 double the projected increase under Harris's proposals, which would add $3.5 trillion. These higher deficits would be in addition to the $22 trillion in budget deficits the U.S. is projected to generate over the decade if no policy changes are made. A likely consequence of increased deficits and inflation is higher interest rates, with 61% of economists foreseeing higher rates under a hypothetical Trump presidency than under Harris.
