I was trying to think about how to contextualize the impact of the Trump 10%/60% tariffs on inflation. McKibbin-Hogan-Noland (2024) trace out the impact of this measure (as well as mass deportation) on inflation using an updated version of the G-Cubed model. In 2025, they estimate inflation will be 0.6 percentage points above baseline. Goldman-Sachs also come up with similar implied effects (although in their scenario, they only assume a portion of the tariffs are implemented)
If I add the 0.6 ppts to September 2025 expected inflation (according to the U.Michigan survey), then, I obtain the following picture.
Figure 1: Year-on-Year CPI inflation (bold blue), UMich survey of consumer expectations (light blue square), UMich expectations plus 0.6 ppts (red triangle). Source: BLS via FRED, UMichigan, McKibbin-Hogan-Noland (2024), and author’s calculations.
Note that mass deportation of only (!) 1.3 mn net immigrants would lead to about 0.35 ppts higher inflation in 2025, 0.55 ppts by 2026. (The deportation on net of 8.3 million would lead to about 2.25 ppts higher inflation by 2025, and 3.5 ppts by 2026.)
My discussion of tariffs and cost of living on WPR the other day. More discussion at Main Street Agenda: Inflation in Milwaukee on October 15 (with my colleague J. Michael Collins and other panelists).
I suspect estimates of the inflationary cost of deportation fall short of reality. There would be supply and demand-side effects, of course. Correcy me if I’m wrong, but my suspicion is that supply-side estimates leave out the effect of the labor required to deport millions. I don’t have any feel for the manpower requirement, except that it would be big. One-to-one, maybe? That’s 1.3 million workers producing investigation, arrest, incarceration and deportation – none of which is in my consumption basket.
Think the military can be called upon to handle it? Not legally:
https://www.law.cornell.edu/uscode/text/18/1385
Besides, isn’t our military supposed to be doing the job it already has?
Top of page 9:
“Figures 15 and 16 compare US GDP and US inflation outcomes, respectively, under the two scenarios. In the 8.3 million deportation scenario, US GDP is 7.4 percent below baseline by 2028 (figure 15). Given that the baseline GDP growth is approximately 1.9 percent per year, this
implies that the level of US GDP in 2028 is almost unchanged from that in 2024 –i.e., no economic growth occurs over the second Trump administration because of the negative effects of the deportation policy alone. Inflation is higher than otherwise through 2028 in both
scenarios (figure 16). In the extreme scenario, inflation rises 3.5 percentage points by 2026, and the CPI price level is 9.6 percent higher by 2028, but inflation falls over time to baseline as the Fed eventually succeeds in taming price pressures.”
Trump’s insane idea of kicking immigrants out would do massive damage to the US economy. But Bruce Hall would be happy as he would not have to live in a neighborhood with a couple of Hispanics! MAGA!
Oh, please. All this is nonsense.
Says who? The moron who thinks 2 months of falling real GDP is a recession? The moron who thinks GDP/M2 is a constant? The idiot who makes up the dumbest explanation of the Real Business Cycle model ever written? Or the clown who think “suppression” is an economic concept?
Listen clown – it would be nice if you READ their paper and articulated a coherent critique. But we know a moron like you could never understand what they wrote.
Oh please, something other than drive-by sneering.
Or are you so tired of being exposed for poor analysis that drive-by sneering is all you’ll dare?
I’m hearing that the damage from Milton alone will be $50 billion. Between these two hurricanes, Florida and the other states will need lot of manpower to rebuild. Part of that manpower could be – and should be – legal immigrants.
But the racist duo of Donald Trump and JD Vance want to deport over 8 million of these potential workers.
Yea – the damage to our economy ala massive deportation will be immense.
Of course little Princeton Stevie Koptis misses his time on Fox and Friends so he declares this to be “nonsense”. Why is it nonsense. Stevie has no clue but alas this clown will likely write a bunch of BS attempting to justify his sick comment.