What impact would Donald Trump’s economic program have?

After a first government marked by strong tax cuts and an increase in tariffs for imported products from China, the republican candidate for president of USA, Donald Trump, He wants to take that path again.

He even proposes generalizing tariffs on all imports, within the framework of an economic program that contains risks in a country faced with persistent inflation and a high level of debt.

The costs to consumers, according to some analysts, could amount to an additional $500 billion a year, and new tax cuts could push up public finance deficits.

What are Donald Trump’s economic proposals and their potential consequences?

What is your strategy?

The former president’s strategy can be summarized in a formula: lower taxes and finance this tax reduction with a general increase in tariffs on all products entering the United States.

For Trump, “great defender” of customs tariffs, these taxes can make it possible to fight against “countries that try to take advantage” from the United States, like China, he points out. The mechanism can establish a basis for negotiation with other States.

Tariffs on all products entering the United States would go to 10% and some, particularly for Chinese products, could reach up to 60%.

According to the Department of Commerce, the United States imported more than US$3.8 trillion in goods and services in 2023.

With the money obtained, Trump would finance a tax cut “broad for the middle class, the upper class, the lower class, the business class”. Although details are not known, the idea would be to extend the tax cut from his first term, prolonging measures that expire in 2025.

What impact would it have on Americans?

According to Trump, the tax cut will offset the increase in the price of some goods resulting from higher tariffs, particularly consumer products.

The planned increases in customs duties would represent an extra cost of $1,500 per household per year, according to the Center for Americans, a Washington think tank. For Oxford Economics, this policy would mean an increase in inflation of 0.6 percentage points.

Consumption taxes, whether VAT or customs duties, generally hit lower-income households hardest, whose unavoidable expenses represent a larger part of their income than for richer households.

For the Peterson Institute for International Economics (PIIE), the twenty% of the lowest-income population would have 3.7% less purchasing power, compared to an increase in 1.4% for him 1% of the richest Americans.

What would be the impact on public finances?

According to a report from the Congressional Budget Control Office (CBO), Trump’s proposed tax cut could increase the fiscal deficit by $4.6 trillion.

This data means that, if the Republican’s plan comes to fruition, the authorities should find a way to contain the red in public finances, for example by cutting public spending.

In a report published in mid-March, the research unit of the insurer Allianz considered that “A new debt-financed tax cut (or increase in public spending) could boost inflation and reinforce market concerns about the sustainability of US debt.”

For the Peterson Institute, the Republican’s proposals constitute a “serious risk to national security.”

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