Former U.S. President Trump, effectively confirmed as the Republican presidential nominee, has recently criticized the high inflation as a result of policy failures by the Biden administration.

• Trump attributes the high inflation in the United States, the highest in half a century, primarily to the policies of the Biden administration, particularly its environmentally friendly energy policies.

• He pledges to stabilize prices by deregulation and energy development, aiming to reduce the high energy costs associated with Biden's Green New Deal.

• Trump's policies, characterized by protectionist trade measures to expand domestic manufacturing, immigration restrictions, and energy policies, will be comprehensively reviewed for their impact on inflation.

The Inflationary Impact of Trump's Trade Policy

• Trump's trade policy involves imposing a universal base tariff of 10% on all imported products and along with aggressive policies levying matching tariffs at the same level on U.S.-made products.

• Such comprehensive and universal tariff imposition raises tariff barriers overall, leading to an increase in overall import prices and acting as a factor promoting inflation.

• Trade policies aimed at constraining China (existing policies plus high tariffs on all Chinese imports) may lead to an overall increase in prices due to a sharp decline in imports from China.

The Inflationary Impact of Trump's Immigration Policy

• Trump has pledged tough measures against illegal immigration, such as ending birthright citizenship for children of illegal immigrants and implementing immigration restrictions prioritizing employment for American workers.

• Trump's immigration policy, which aims to strengthen immigration restrictions, is expected to promote inflation by restricting both high-skilled and low-skilled labor immigration, which contribute to productivity enhancement and stability in living costs, respectively.

The Inflationary Impact of Policy Uncertainty

• Trump's doctrinaire tax reduction policies and abrupt shifts in energy policy increase policy uncertainty, potentially leading to downward economic risks, prompting rate cuts, and possibly triggering inflation.

The Impact on the Independence of the U.S. Federal Reserve's Monetary Policy

• If Trump is elected, continued demands for rate cuts for economic stimulus could lead to excessive rate cuts due to the weakening of the independence of the Federal Reserve, potentially resulting in inflation.

• While the Fed's monetary policy has traditionally operated independently of political influence, Trump's presidency could undermine the Fed's credibility.