Economic reality catches up with every president, and Donald Trump is no exception. His Mar-a-Lago entourage and perhaps the president-elect are already learning that what’s promised either cannot be fulfilled or would be terrible if it was. So now they’re backpedaling on his three central campaign commitments.
Trump’s number one pledge was to round up, detain, and deport 11 million or more immigrants. Promises were easy as the Republican nominee, but as president, Trump would have to deal with the costs of carrying it out and its economic fallout, so his transition team leaked that the promise was already shelved.
They’ve seen the budget numbers showing that his deportation will be $100 billion-plus yearly throughout his term. The economists in the group presumably know that 7 million of those immigrants hold down jobs, so deporting them will disrupt many labor markets. The dose of economic reality here is that pulling millions of people from the workforce will create temporary shortages in the products they produce, temporarily pushing up their prices. Replacing them will force their employers to pay higher wages, pushing up prices for the long term.
So, the word from Mar-a-Lago is that Trump’s immigration promises will be downsized into a plan to kick out those charged or convicted of serious crimes or links to foreign terrorism. The embarrassing part is that this will affect only 4 to 5 percent of those Trump promised to deport and was already U.S. policy under Joe Biden and Barack Obama.
It recalls what happened to Trump’s central pledge in 2016 to end unauthorized immigration by building a wall spanning the 1,954 miles of the U.S.-Mexico border. That time, the reality check came from Republicans in Congress who balked at paying for it. (Trump’s insistence that Mexico would pay for it was even more fantastical.) Ultimately, Trump built 80 miles of new wall, spanning 4 percent of the border, and replaced another 372 miles of wall built under Barack Obama and George W. Bush. It’s very challenging to imagine GOP budget hawks in Congress will fund the much higher costs of Trump’s 2024 plan for immigration.
Trump has also declared that he won the 2024 election on inflation, and as president, he will “bring those prices way down.” The 78-year-old himself has already discarded that promise and now says he always meant to slow price increases—a goal that the Biden administration has already achieved. (It was Time correspondent and Washington Monthly Contributing Editor Eric Cortellessa who extracted from Trump the admission that he isn’t going to lower food prices.)
Economic reality explains Trump’s backpedaling on this second central campaign promise. Presumably, the economic advisers in his transitions have explained that there are two ways to engineer overall lower prices, and neither is acceptable. One route to the promised deflation would be a long, deep depression. That obviously would be a profound hardship for the country, political suicide for Trump and his economic officials, and perhaps as importantly, do severe damage to the Trump family assets. The other path to temporary deflation might appeal more to Trump: Bring it on by presidential fiat through strict government price controls. The pesky reality here is that this course also would tank the markets and alienate the wealthy donors who bankrolled 70 percent of Trump’s 2024 campaign.
Economic reality also leads Trump to downsize his third central campaign promise, the pledge to impose 60 percent tariffs on U.S. imports from China and 10-to-20 percent tariffs on imports from everywhere else. Trump’s transition team now says (without attribution) that the tariffs may be lower and apply to only the subset of imports that the White House deems to be linked to national and economic security.
A security focus has been part of U.S. export policies, adjudicated on a case-by-case basis, since 1975. Applying this focus to imports would essentially broaden the tariff policy that the Biden administration maintained in his first term but with one twist. With the Trump White House deciding what is or is not covered under the security umbrella, the downscaled tariff policy could become a form of crony capitalism where the president could grant exemptions for companies he favors—for example, a major supporter’s company with large Pentagon contracts for rocket and satellite technologies that rely on foreign-made parts.
Trump denies backpedaling on tariffs, but he will find it hard to ignore what his transition team seems to accept—that his tariff plan will damage the economy and Trump’s political standing. The economic reality is that the plan would substantially raise the prices Americans pay for goods and services, which totaled $3.9 trillion in 2023.
That’s the market’s message on expected inflation, based on rising yields for long-term bonds, and the message the Federal Reserve has sent in stepping back from its announced plans for multiple interest rate cuts in 2025. And no one needs to remind Trump that if inflation goes up on his watch, the Fed will slow the economy by raising rates.
It gets worse for Trump because everyone should expect our trading partners to respond to any U.S. tariffs with new tariffs on America’s exports, totaling $3.1 trillion in 2023. That’s what happened when Trump imposed much more limited tariffs in 2018. This year’s plan would trigger broader and sharper retaliation, substantially depressing total U.S. exports and costing tens of thousands of Americans their jobs. It’s a scenario familiar from the 1930s when the United States hiked tariffs by 20 percent, everyone else retaliated, and a long recession became a longer Depression.
Donald Trump can be bombastic and stubborn. He has also demonstrated that he can convince people to buy into an imagined reality or distract them entirely, perhaps explaining the saber-rattling toward Canada, Denmark, Panama, and Greenland. But Trump knows prices and unemployment can’t rise on his watch. He would face grim economic and political realities if he pushes forward with his central campaign promises. I doubt Trump ever read Charles Darwin, but it’s a good bet he’ll adapt to survive.
