When Donald Trump is sworn in as the 47th president of the United States on January 20 next year, one of the first things economists expect him to do is enact at least some of the tariffs he promised while on the campaign trail.
As a candidate, Trump said he would impose 10 percent to 20 percent tariffs across the board on imports, and 60 percent on imports from China.
Economists expect him to start with tariffs targeting a few countries, including China and other trading partners such as Canada, Mexico and the European Union.
“He will at least threaten them with the tariffs and if they don’t negotiate to his liking, Trump will put them on,” Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, tells Al Jazeera.
And while he expects “fairly stiff tariffs” on imports from China, Hufbauer says there will likely be exceptions for billionaires who supported Trump, including businesses like Elon Musk’s Tesla and TikTok.
“How far tariffs go depends on how far President Xi is willing to negotiate with Trump,” he says, referring to Chinese President Xi Jinping.
But it’s not just China.
Trump had promised the European Union would have to “pay a big price” for not buying enough US products. Fears of some of that played out on the European stock markets on Wednesday. German vehicle makers, including Mercedes-Benz Group and BMW, were some of the stocks to feel that fear and lost around 6.5 percent each.
Similarly, Canada, too, is vulnerable to Trump tariffs as 75 percent of its exports are to the US. Trump said last month that he would renegotiate an existing US-Canada-Mexico pact known as USMCA and would “have a lot of fun” doing that.
“There will be quite a lot of disruption in the world trading system,” Hufbauer warns.
‘Timely’ fiscal policy
Beyond tariffs which are “the biggest wild card”, fiscal policy will consume a lot of time and energy in Washington, DC next year, says Bernard Yaros, lead US economist at Oxford Economics.
He says the existing tax cuts coming to an end, the debt limit expiring and the annual practice of setting the budget, are all likely to converge at around the same time.
All of those have to be passed by the US Congress. Republicans have won control of the US Senate and if they remain on track to get a majority in the House of Representatives as well – the final outcome is expected by the end of the week – then Yaros expects the fiscal policy measures to be passed in a timely manner.
He also expects Congress to repeal parts of President Joe Biden’s signature Inflation Reduction Act (IRA) including clawing back some climate spending and tax credit for electric vehicles. But he expects the clean energy tax rebates to largely remain in place as those have gone to several Republican-led states.
About a dozen House Republicans are on record supporting the IRA credits for investment in, and electricity generation from, renewable resources, as red states have disproportionately benefitted from clean energy investments, Oxford Economics noted in a post-election analysis.
‘Inflationary and disruptive’ immigration
The one other issue expected to get immediate attention from Trump is that of immigration.
“Whether Trump starts to round up people and deport them, both are inflationary and disruptive and makes it difficult for businesses to plan,” says economist Rachel Ziemba adding that the humanitarian effect of that will have its own massive toll. Some of that was seen in Trump’s first term.
Economists expect US immigration policy to turn restrictive by mid-2025. That is likely to be done by lowering refugee admissions and reinstating the Migrant Protection Protocols, commonly referred to as the “remain in Mexico” policy.
The latter required asylum seekers to wait in Mexico as their cases progressed through immigration courts, rather than in the US, where they could become eligible to obtain work authorisation.
It is many of those immigrants who contributed to the surge in the US labour market in recent months. And their removal will see a tightening in the job market which could have other spillover effects including on wages and inflation.
While economists repeatedly warned in the run-up to elections that a Trump presidency will be inflationary, that will happen only once these policies have kicked in, they say.
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