Take it from conservative economists: Trump could derail U.S. economic upswing

Andres Oppenheimer

Democratic candidate Kamala Harris cannot say this very loudly, because no presidential hopeful wins an election saying that things are good. But the fact is the U.S. economy is doing very well, certainly much better than the “disaster” Republican hopeful Donald Trump claims it to be.

Don’t take my word for it: Consider what leading financial institutions and conservative economists — people who can’t be labeled as “socialists,” as Trump likes to portray his critics — are saying about America’s economy. And see what many of them have to say about the potential impact a Trump victory would have on U.S. consumers, on Latin American and other world economies.

According to an Oct. 22 International Monetary Fund report, the U.S. economy remains the engine of global growth, and will grow more than expected in 2024 and 2025.

The IMF has increased its earlier U.S. growth projections to 2.8% this year, citing a stronger-than-expected consumption and higher inflation-adjusted wages. It will be the second year in a row in which the United States has the highest economic growth rate among developed countries, the IMF figures show.

The influential British magazine The Economist carried a special report on Oct. 19 whose headline says the U.S. economy is “the envy of the world.” The report said, “the American economy has left other rich countries in the dust.”

The Wall Street stock market is at a record high, and gasoline prices have fallen drastically in recent months. We may see gas prices below $3 a gallon by election day in some swing states, according to a Fortune magazine report.

It may be no coincidence that, in recent weeks, Trump has been focusing much more on his anti-immigration pitch than on the state of the U.S. economy. He’s still repeating his false assertion that President Biden and Harris have “destroyed the American economy” and the even more ridiculous claim at the United States has become a “failed nation,” but immigration has become his top campaign issue.

The latest economic data have made his apocalyptic economic predictions sound increasingly off the wall. They sounded true in 2021 and 2022, when inflation was much higher, but the U.S. economic rebound since then has made them sound hollow today.

What’s more, international economists warn that if Trump carries out his promises of drastically increasing import duties, implementing mass deportations and having an active say in the Federal Reserve’s decisions on interest rates, the resulting inflation would slow down America’s economic growth.

“Trump’s three major economic proposals are highly inflationary…and would produce a U.S. economic contraction by 2026,” Marcelo Giugale, a former head of the World Bank’s Department of Financial Advisory and Banking Services, told me. “Both Latin America and the rest of the world would be better off with Harris.”

Alejandro Werner, a former head of the International Monetary Fund’s Western Hemisphere department, agrees.

Werner told me that mass deportations, for instance, would increase existing labor shortages in the construction industry, agriculture, and other industries, and increase U.S. labor costs. Such costs would be passed on to U.S. consumers, increasing inflation and slowing down U.S. economic growth, which would be bad news for Mexico and other countries that rely heavily on their exports to the U.S. market.

Granted, many Americans have bad memories of the first two years of the Biden administration, when post-pandemic inflation rates hurt them badly.

The big question now is whether enough Americans have become aware of America’s economic upswing, and of their increasingly improved purchasing power, or whether their bad memories about the economy — amplified by Trump — will prevail at the time of casting their ballots.

I don’t know the answer to that. The only thing we can say for sure is that there is a widespread consensus among economists that the U.S. economy has come back strongly, notwithstanding Trump’s false claims to the contrary.