How inflationary would Trump be?

Donald Trump still leads in most polls, and betting markets give him a better than even chance of winning the election this November. So it’s important to think about what his actual policies would be, and how these would affect the outcomes that Americans care about.

Right now, the outcome Americans probably care about most is inflation. So we should get ahead of the game here, and think about how Trump’s policies would affect prices.

This is an inherently difficult exercise. Trump isn’t wedded to a particular ideology and is often very open to persuasion – especially if you come bearing large checks for him and his businesses.

Predicting whether he’ll follow through on his policy promises in a forceful and substantive way or whether he’ll make a symbolic gesture and leave it at that, is always tough. But if we’re going to make an informed decision about who should be president, we need to take our best guess.

The basic story here is that there are three main ways Trump could increase inflation in the US: tariffs, deficits, and pressuring the Fed to lower interest rates.

Tariffs and inflation

A number of people are warning that Trump will raise inflation by putting up high tariffs. For example, here’s Matt Yglesias:

Trump has promised a 10% tariff on all imports from all countries, a 60% tariff on all Chinese goods and a 200% tariff on all cars made by Chinese-owned companies. Tariffs raise consumer prices — in economics terms, they represent a negative supply shock. Negative supply shocks reduce growth, increase unemployment, and push up inflation. So if you care about inflation, it’s reasonable to worry about this.

There are lots of uncertainties concerning just how much tariffs push up prices. To give just one