Trump’s pledge to deport the most US workers in history could trigger recession and an inflation spike, economist says
By Filip De Mott, Business Insider
Donald Trump’s vow to initiate the country’s biggest deportation campaign is a massive stagflationary hazard, risking an economic downturn amid even tighter monetary policy, one think-tank economist said.
Summary:
De Mott discusses economist Adam Posen’s views on the potential economic impact of Donald Trump’s proposed deportation plans and trade policies if he were to win the 2024 presidential election.
Key points:
- Trump has pledged to carry out the largest deportation campaign in US history, which Posen considers a significant stagflationary threat.
- Trump has vowed to deport all 7.5 million undocumented workers in the US.
- Posen argues this massive reduction in the labor supply would lead to:
- Increased labor costs for firms
- Higher consumer prices
- Slower economic growth
- A “manufacturing-centered recession”
- Combined with Trump’s proposed trade policies, including higher tariffs, the risk of inflation increases further.
- In response to these policies, Posen predicts the Federal Reserve would need to aggressively raise interest rates in the second half of 2025.
- The article notes that while a Biden presidency also carries some inflation risks, they are expected to be less extreme than under a Trump administration.
- Both candidates face broader inflationary pressures, including increased federal spending and current interest rates that may not be sufficient to curb inflation.
