Economist and Nobel Prize winner: Donald Trump's plans would boost inflation

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Former President Donald Trump's economic plan would be a “disaster” for the United States, and implementing his proposed tariffs on Chinese imports would drive up inflation, a Nobel Prize-winning economist says.

“If Trump could actually push through his agenda, it would be a disaster,” said Joseph Stiglitz, who served as chairman of the Council of Economic Advisors under President Bill Clinton. said Quartz in an interview.

Stiglitzwho most recently served as chairman of the International Economic Association, said Vice President Kamala Harris had “implemented with great certainty a number of well-thought-out proposals from the Biden administration.”

“Trump changes his mind about something every other day,” Stiglitz said, arguing that Trump's proposed 50 percent tariffs on Chinese goods would hit low- and middle-income Americans. “Those tariffs would significantly increase the cost of living, it would be a shock to the economy, and that inflation would in turn cause the Fed to raise interest rates.”

Reducing American dependence on China cannot be achieved with a sledgehammer, Stiglitz said. “Biden and Harris' proposal for a 10 percent tariff is an important signal to the market: 'You better think about diversifying your supply chain.' And that's what I would call good economic management. Good economic policy means balancing multiple concerns, and that kind of balance is what separates Harris from Trump.”

On the details of Harris' plans, which range from increasing the child tax credit to the planned construction of three million new homes, Stiglitz said: “The overall package is moving in the right direction.”

“These are cumulative problems that have gone unaddressed for 30 years,” he said, “and they will not be solved overnight.”

Harris' plans would also address the growth of monopolies that hamper innovation in the U.S. and drive up prices, Stiglitz said.

“One of the weaknesses of the U.S. economy over the last 20 years has been a significant growth in market power, and this increase in market power reduces innovation, increases inequality and lowers the real wages of ordinary Americans,” he said. “This is one aspect of [the Biden-Harris] Economic policies that will make a difference.”

Perhaps the biggest difference between Trump and Harris is their Tax policy.

“The 2017 [Trump tax cut] was a huge tax cut for the millionaires and in reality a tax increase when it was fully implemented for a large portion of Americans,” Stiglitz said. “What we need to do is restore tax fairness, raise taxes on the billionaires who can obviously afford it, and help address some of our big inequality problems, like child poverty.”

Trump's move to reduce corporate tax from 28% to 21% did not contribute to improving the competitiveness of the USA, but only increased Share buybackssaid Stiglitz.

“Expansion [Trump’s] Tax cuts when they expire in 2025, and even deeper cuts would blow a huge hole in the deficit,” he said. “Remember, they expired in 2025 because the deficit created by the tax bill was so large that not even Republicans would vote for it.”

“The irony of his policy is that while it has a lot of support from people who feel they have been let down by the system,” Siglitz added, “his proposal will let them down even more.”