Inflation has been slowing. Will Trump help or hurt?

Americans’ deep-seated frustration over inflation propelled Donald Trump to victory in the presidential race early this month.
But will Trump’s policies ease inflation? Or could they make it worse?
In the final Forbes/HarrisX national poll released the Monday before the election, 36% of respondents said prices/inflation was their top concern, a larger share than any other issue. And 54% of registered voters viewed Trump as better able to handle the economy, compared to 45% who saw Harris as a better steward, according to a separate Gallup poll.
In other words, voters saw Trump as a “change” candidate who presumably can address high consumer prices, economist Bernard Yaros of Oxford Economics wrote in a note to clients.
Now that Trump is set to take office in January, here’s a look at inflation and where economic forecasters say it’s likely headed.
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Inflation is the rise in consumer prices over a specific period of time. Economists typically focus on the average price changes of a broad basket of goods and services – such as the Labor Department’s consumer price index – that represent what Americans typically buy.
Officials assign weights to various items based on their shares of overall consumer spending. That determines how much impact the cost of each good or service has on the average change in total prices.
Inflation is the rate of change in prices, often measured over the course of a year. That’s very different than the actual prices Americans pay at the grocery store checkout or for their car insurance.  
Inflation has been gradually slowing since mid-2022 as COVID-19-related product shortages have resolved, consumer demand has cooled following a post-pandemic spending spree and wage growth slows amid a bigger labor supply. The Federal Reserve’s aggressive interest rate hikes also have moderated inflation by raising borrowing costs for consumers and businesses, prompting them to reduce their purchases.  
In September, the Fed’s preferred measure of yearly inflation was at 2.1%, down from 7% in March 2022 and just above its 2% goal. A “core” inflation reading that excludes volatile food and energy items was at 2.7%, down from a peak of 5.6%.
But the slowdown in the annual inflation rate hasn’t mollified consumers because prices are still much higher than they were when the run-up began in early 2021. And the cost of essentials such as food, rent and gasoline have climbed faster than inflation overall, leaving a lasting imprint on household budgets, Yaros said.
In October, for example, grocery prices were up just 1.1% from a year earlier, according to the CPI. But they were nearly 22% higher than in January 2021, compared to a 20% rise for the overall CPI. Rent was up 23.4% and gasoline, 27.7%.
Lower-income households “had to allocate a permanently larger share of their consumption toward basic necessities at the expense of discretionary purchases,” Yaros wrote in a note to clients. “As a result, many voters still do not feel better off, even as the rate of change in consumer prices moderated.”
Inflation was expected to continue to drift down close to the Fed’s 2% goal by the end of next year as household consumption and employee pay increases continue to slow modestly. But top economists now say Trump’s trade and immigration policies could keep inflation elevated through 2025 or longer.
Trump has threatened to slap 60% tariffs on imports from China and 10% to 20% on shipments from all other countries, far more sweeping levies than those he imposed in his first term in a bid to prod manufacturers to move production to the U.S.
Several top economists believe he’ll stop short of such substantial fees. Goldman Sachs figures he’ll increase tariffs by 20 percentage points on Chinese imports and toss in some additional duties on auto shipments.
Under that scenario, the Fed’s preferred core inflation measure would still fall from 2.7% in September to 2.4% by the end of 2025, but that’s higher than the 2.1% Goldman estimates without tariffs.
Bank of America and Nomura predict more dramatic effects, with inflation continuing to hover between 2.5% and 3% through next year instead nearing the Fed’s 2% target.  
These estimates account for several factors that could mitigate the impact of tariffs on prices. Some U.S. retailers and manufacturers are likely to absorb the fees through lower profits instead of passing them along to consumers. Companies could shift their imports to countries with lower tariffs. And a drop in imports would strengthen the dollar, lowering import prices after dollars are converted to foreign currencies and offsetting some of the tariff effects.
Trump also has vowed to deport millions of immigrants who lack permanent legal status and reinstate programs forcing asylum seekers to wait in Mexico while their cases are resolved. Goldman estimates net immigration would fall to about 750,000 a year from 1.75 million recently and about 1 million before the pandemic.
An immigration surge the past couple of years alleviated pandemic-related labor shortages, slowing wage growth and inflation. Curtailing immigration would again make it tougher for employers to find workers and likely would push up wages and prices, especially in industries with large shares of foreign workers, economists say.
For example, 68% of agriculture workers are immigrants and 44% of that group lacks permanent legal status, according to Farmworker Justice, a non-profit that helps migrant farm workers improve their living and working conditions.
Goldman said the impact of an immigrant crackdown on inflation likely would be modest. Barclays said it could be significant, though it wasn’t more specific.
The main strategy Trump has pushed to lower prices is to open more federal land to oil production, Oxford said. That could reduce gasoline prices but it would not affect the core inflation gauge that excludes food and energy.
Energy and food prices are often more unpredictable because they respond to the price swings of global commodities like oil and wheat. The Fed prefers to focus on more sustained price changes that reflect consumer and business demand and can be affected by interest rates.
U.S. oil production is already at a record high and prices, at $69 a barrel, are at a nearly four-year low.  
While consumer prices are now rising more slowly, average consumer prices don’t typically decline. The population and economy keep growing, fueling demand that props up prices. If prices do fall broadly, that’s called deflation and it’s a worrisome sign of a weak economy and it can feed on itself: Consumers put off purchases because they expect costs to keep tumbling, crimping demand and growth, and further pushing down prices.
As COVID-related supply chain snarls have unwound, prices of some goods that soared early in the health crisis – such as furniture, appliances and used cars – have dropped the past couple years, though they’re still notably higher than before the pandemic. Oil and gasoline prices also have pulled back on softer global demand and increased production.
The cost of other items, such as groceries and rent, have continued to climb but at a slower rate, in part because of healthy consumer demand.