Trump's tariffs 'a tax on American consumers' says one chief economist

Donald Trump's bold promises to vanquish inflation may have the opposite effect, according to a top economist.

Mark Zandi, chief economist at Moody's Analytics, told MSNBC that Trump's proposed economic policies, particularly new tariffs, could actually reignite inflation.

His analysis contradicts Trump's recent claims at the Republican National Convention that "inflation would vanish" under his presidency.

"It would add to inflation," Zandi said. "The tariffs are a tax on American consumers, particularly lower or middle-income consumers who spend a lot larger share of their budgets on the goods that are imported."

Zandi went on to explain that Trump's proposed tariffs, including a 10% levy on all imported goods and a staggering 60% tariff on Chinese imports, would have far-reaching effects.

These policies would likely lead to price increases on everyday items such as food, apparel, appliances, consumer electronics, and vehicles.

“If consumers have to pay more for essential goods, that means they have less to spend on everything else," said Zandi. This reduction in purchasing power, he argued, makes the tariffs "essentially a tax."

Moody’s report predicts inflation to accelerate under Trump

Zandi's comments echo a recent report from Moody's Analytics, released just last month. The report warns of potential economic consequences if Trump's policies are implemented.

According to the analysis, a Republican sweep in the upcoming election could lead to a resurgence in inflation.

The report projects that consumer price inflation might accelerate from 3% in 2024 to 3.6% in 2025 if Trump wins the White House and Republicans gain control of Congress.

The Moody's report attributes this potential inflation spike to a combination of factors associated with Trump's proposed policies.

These include higher tariffs, tax cuts aimed at stimulating the economy, and stricter immigration policies that could tighten the labor market and increase labor costs.

Zandi addressed Trump’s call to deport millions of undocumented immigrants in his appearance on MSNBC. He said deporting an anticipated 10-15 million people would put businesses that are ‘starved for workers’ in a tough spot.

“The unemployment rate is 4.1%, everyone has a job, and wage growth is strong. In that context, if you require millions of folks to leave, that’s a pretty big hole in the economy,” said Zandi.

Will Trump’s bold plans raise the deficit?

A key element of Trump's economic plan is the extension and expansion of his previous tax cuts, set to expire in 2025. Trump's proposal would extend these cuts, benefiting taxpayers across all income levels, and introduce new reductions.

Trump has suggested cutting the corporate tax rate further, from 21% to 15%, following the previous reduction from 35% to 21% during his administration.

Zandi noted that while proposed tariffs could partially offset these tax cuts, they wouldn't cover the entire expense. "This would inevitably add to the deficit and increase the national debt load," he explained.

"An economy running full out, full employment, if you add in this kind of juice, it's going to add to inflation," Zandi warned.

Trump's economic plans have drawn considerable criticism lately. Most recently, 16 Nobel laureates in economics signed a letter expressing concerns about his proposed policies.

Meanwhile, a former Treasury secretary cautioned that Trump's election could lead to "the mother of all stagflations" - back-to-back years of high inflation with economic stagnation.