The international economic implications of a second Trump presidency

This paper explores policies promoted by former president and now candidate Donald Trump that would potentially affect the global economy. We focus on immigration policy, trade, and erosion of the Federal Reserve Board's political independence. Each policy has differing macroeconomic and sectoral impacts on the United States and other countries. We find, however, that all the policies examined cause a decline in US production and employment, especially in trade-exposed sectors such as manufacturing and agriculture, as well as higher US inflation. The trade policies do little to improve the US trade balance; however, the erosion of Fed independence does so by causing capital outflows, a significant depreciation of the dollar, and higher unemployment toward the end of 2028, which worsen American living standards. Scenarios combining individual policies show that the changes cause a large inflationary impulse and a significant loss of employment (particularly in manufacturing and agriculture) in the US economy. The negative impact of a contraction in global trade is significant for countries that trade with the United States the most. The adverse effect is offset for some economies by the positive effects of an inflow of foreign capital that would otherwise have gone into the US economy. An online dashboard contains a full set of macroeconomic and sectoral results for all countries. The Peterson Institute for International Economics has no partisan goal in publishing this research. Our concerns are about the policies, not the candidate. Our objective is to educate policymakers and the public about the effects these policies would have on Americans and other people around the world.