In WSJ survey, economists see Donald Trump’s plans as more inflationary by larger margin than in July when President Biden was on the ticket

Paul Kiernan
Anthony DeBarros

Updated Oct. 14, 2024 12:01 am ET

Former President Donald Trump, the Republican presidential nominee. Photo: Jae C. Hong/Associated Press
WASHINGTON—Most economists think inflation, interest rates and deficits would be higher under the policies former President Donald Trump would pursue in a second administration than under those proposed by Vice President Kamala Harris, according to a quarterly survey by The Wall Street Journal.

The results of the Oct. 4-8 survey echoed those of the Journal’s survey in July, when Trump was facing President Biden. Biden dropped out of the race on July 21, and Harris became the nominee shortly afterward.

Since then, both Harris and Trump have released significant new policy proposals. Harris, for example, has called for new credits for newborn children and home buying, while Trump has proposed tax cuts on overtime pay and Social Security benefits, and breaks for auto-loan interest and state and local taxes.

The upshot: Economists still say Trump’s policies are more likely to add to inflation, deficits and interest rates. If anything, the margin has grown since July.

Of the 50 economists who responded to the survey’s question on inflation, 68% said prices would rise faster under Trump than under Harris. That was up from 56% in July. Only 12% of the economists thought inflation would be higher under a Harris presidency, while the remainder saw no material difference between the candidates.

“Both candidates have policies that are inflationary,” said Dan Hamilton, director of the center for economic research and forecasting at California Lutheran University. But in a change from their July forecast, Hamilton and his colleague Matthew Fienup now see a second Trump term producing faster price increases because of the former president’s tariff plans. “Since July, it became apparent to us that Trump is even more anti-free-trade than Harris,” Hamilton said.

Since July, Trump has pledged across-the-board tariffs of 10% to 20% on imported goods, up from his earlier plan to impose 10% tariffs. He has also proposed a 60% or higher tariff on imports from China.

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Studies of tariffs imposed in his first term found they were often passed through to importers or consumers as higher costs or prices and hurt industries that depend on imported inputs.

“If the tariffs work the way economists think they work, I think people are in for a very nasty surprise,” said Philip Marey, senior U.S. strategist at Rabobank.

Trump has touted tariffs as a way to bring manufacturing jobs back to the U.S., raise money for the federal government and punish countries that have been “ripping us off for years.” He has disputed their downsides, noting that inflation was lower during his presidency—despite a trade war with China and friction with other major trade partners—than under the Biden administration.

“Then—as now—Trump policies will fuel growth, drive down inflation, inspire American manufacturing, all while protecting the working men and women of our nation from lopsided policies tilted in favor of other countries,” said Brian Hughes, a senior adviser to the Trump campaign. “These Wall Street elites would be wise to review the record and acknowledge the shortcomings of their past work if they’d like their new forecasts to be seen as credible.”

The Journal asked economists to assess the proposed policies of the candidates. Whether those policies are enacted depends on several factors, most important the makeup of Congress.

The Covid-19 pandemic and its aftermath make it hard to directly compare the economic records of Presidents Trump and Biden. Employment has grown faster under Biden than under Trump, mostly because the pandemic vaporized more than 20 million jobs in early 2020, setting the stage for a dramatic rebound. Inflation reached a 40-year high under Biden, much of that because of pandemic-related supply-chain disruptions and federal stimulus, some of which was signed into law by Trump.

The Journal’s survey asked economists how Trump’s proposed broad-based tariffs would affect domestic manufacturing employment within three to five years, relative to a scenario with no such policy. Of the 44 economists who responded, 59% said employment would be lower, while only 16% said it would be higher. The remainder said employment would be the same.

While neither Trump nor Harris has expressed much appetite for fiscal rectitude, 65% of economists see Trump’s proposed policies putting more upward pressure on the federal deficit, up from 51% in July.

On the campaign trail in recent weeks, Trump has proposed eliminating taxes on Social Security income and overtime pay, and lowering them on American citizens who live abroad. He has also vowed to step up deportations and immigration enforcement, which could reduce the number of people working and paying taxes in the U.S.

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As a result, the Committee for a Responsible Federal Budget estimates Trump’s plans would widen federal budget deficits by $7.5 trillion over the next decade, more than twice the expected increase under Harris.

A likely consequence of higher deficits and inflation is higher interest rates. The Journal’s survey showed 61% of economists saw rates being higher under a hypothetical President Trump than under Harris.

Economists saw less daylight between the two candidates on overall economic growth: 45% said output would expand faster under Harris, 37% said the economy would grow faster under Trump, and 18% saw no material difference.

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Hamilton, of California Lutheran, said he thinks Trump’s plans to cut corporate taxes and slash regulation would cause the economy to grow faster than it would under Harris, even with the tariffs.

The survey found that economists’ outlook had brightened since July. They now expect U.S. gross domestic product to expand 2.2% in the fourth quarter of 2024 from a year earlier, compared with an average forecast of 1.7% in July. Inflation as measured by the consumer-price index is seen at 2.5% at the end of this year, down from a July forecast of 2.8%.

Meanwhile, unemployment is seen closing this year at 4.2%, little changed from in July. It was 4.1% in September.

The average probability economists assigned to recession in the next 12 months has fallen to 26%, from 28% in July. The percentage who gave an “A” grade to Federal Reserve Chair Jerome Powell’s job performance rose to 45% from 20% in October 2023, the last time the Journal asked that question.

Particularly reassuring, several economists said, was a large upward revision by government statisticians to the estimated share of personal incomes that are being saved. The revision showed U.S. households squirreled away $454 billion more in July than previously believed. Since consumer spending drives about two-thirds of economic output, a higher saving rate suggests the expansion has legs to run further.

“The U.S. economy is showing a surprising resilience,” said Dana Peterson, chief economist at the Conference Board.

The Journal’s October survey received responses from 66 professional forecasters from business, Wall Street and academia. Some forecasters did not answer every question.

Write to Paul Kiernan at paul.kiernan@wsj.com and Anthony DeBarros at anthony.debarros@wsj.com