A scene on tariffs from Ferris Bueller’s Day Off in 1986 is getting some extra attention. (Paramount Pictures.)
Fans of the movie, “Ferris Bueller’s Day Off,” will remember the scene. Ben Stein plays a famously boring high school teacher giving a lecture about economics to a room full of teenagers fighting to stay awake. In about a minute, he covers the Smoot-Hawley Tariff Act and the Laffer Curve, fundamental economic topics, desperately trying to get the students to engage with him.
“Anyone? Anyone…” is the memorable device Stein uses, to no avail, to engage an audience who couldn’t care less.
Some analysts say the economy is the reason voters chose Donald Trump for a second term in last month’s election. His economic plan is rooted in the broad and cavalier use of tariffs on imports from friends and foes alike. Last week, he announced his plan to impose 25% tariffs on Canada and Mexico. The announcement prompted a surprise visit from Canadian Prime Minister Justin Trudeau, and a phone call from Mexican President Claudia Sheinbaum.
Meanwhile, the American public, particularly Trump voters, remain in an economic daze much like Ben Stein’s class.
The Smoot-Hawley Tariff Act was passed in 1930 in an attempt to thwart the impacts of the Great Depression. It was legislation initially designed to provide relief to the American agriculture sector but became “a means to raise tariffs in all sectors of the economy.” It also marked the end of an entrenched Republican platform of protectionist policymaking during that era. The policies ended because they were…anyone…anyone? Failures.
The details
Ignorance has become a vital asset in the political space these days. Yes, it is an asset in politics, but it is the devil in economics.
As a political asset, there are voters who believe that simply throwing a tariff at any nation they are mad at has nothing but benefits. Mad at Mexico because of migration? Slap them with a tariff and border crossings will go down, right? A good number of voters believe the answer is yes. Though this is almost entirely wrong, politically speaking, that ignorance served the pro-tariff candidate in November.
Economically however, the only real certainty that a 25% tariff on Mexico will have, is a 25% price increase in America. There actually is no disagreement on how tariffs functionally work, but I will refer to PBS for a simple explanation. Importers here pay the tariff, otherwise known as a tax, and remit that payment to the U.S. Treasury. How they pass that increase in costs along may vary a little from merchant to merchant, but ultimately it ends up in the price the American consumer pays.
Yes, a tariff program, in the most basic sense, is government imposed price increases. So, if high prices are the reason why an American voted against the current party in power, voting for higher prices seems, well, ignorant.
Now, does a tariff hurt who the angry American is mad at? Sure. In our example, Mexican goods become less affordable if a tariff is applied to them. In that sense, a tariff can hurt who it is designed to hurt. But that doesn’t change the fact that Americans pay the tariff, not the other country.
Many voters have the perspective that Trump imposed tariffs during his first term, and everything worked out fine. The Associated Press reports, “When Trump first became president in 2017, the federal government collected $34.6 billion in customs, duties and fees. That sum more than doubled under Trump to $70.8 billion in 2019, according to Office of Management and Budget records.” That sounds like a lot of money, until it is put in the context of the current $29.3 trillion gross domestic product.
The tariffs Trump is discussing in 2024 are wildly bigger and are being threatened toward virtually every country. But that’s not the only thing different between 2024 and 2017.
What else is different?
Anyone? Anyone?
The economy that Trump inherited in 2017 is sharply different than the one he will inherit in January. Inflation eight years ago was low and had been for a long time. Interest rates were also low and had been for a long time. The 2016 election wasn’t about inflation, and those rather small tariffs weren’t either. But times have changed.
For the life of me, I cannot find any credible theory as to how raising prices on imported goods will have the effect of lowering prices. I’ve written that sentence six times, and I know it reads like gibberish, but I just can’t help it.
Simply put, tariffs raise prices. After a bout with historic global inflation, consumers are exhausted with high prices. We can all agree with that part.
But there is a word for thinking that raising prices will actually lower them.
Anyone? Anyone?
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A ‘For Sale’ sign is seen on March 19 in Austin, Texas. Policymakers are watching for indications of what President-elect Donald Trump plans to do to ease housing costs next year after an election where voters were laser-focused on the economy.
Americans hand over a huge chunk of their paycheck for a roof over their heads. Policymakers are looking out for indications of what President-elect Donald Trump plans to do to ease housing costs next year after an election where voters were laser-focused on the economy.
Housing accounted for 32.9% of consumers’ spending in 2023, making it the largest share of consumer expenditures, according to the most recently available data Bureau of Labor Statistics. And that was an increase of 5.7% from 2022.
This year, many Americans still struggle to find affordable housing, whether they choose to rent or buy a home.
There’s a lot economists and housing advocates still don’t know about what to expect from a second Trump term. It’s unclear which campaign promises will find their way into administrative rules or legislation, even with a Republican trifecta – the GOP will control the White House and both chambers of Congress.
But policy experts, researchers and economic analysts are looking at Trump’s record, his recent remarks on housing, and Project 2025 – the conservative Heritage Foundation’s 900-page plan to overhaul the executive branch – for a glimpse of what may lie ahead.
Tariffs and the cost of building homes
Trump has spoken frequently of his proposed 60% tariff on goods from China, which he has said would create more manufacturing jobs in the U.S. Tariffs could be as high as 20% on goods from other countries.
But housing economists and other experts say that could be bad news for building more affordable housing.
Selma Hepp, chief economist for CoreLogic, a financial services company, said tariffs are one of her main concerns about the effects of a second Trump term.
“One of the biggest concerns is not just lumber [costs], but the overall cost of materials, which have been going up,” said Selma Hepp, chief economist for CoreLogic, a financial services company.
Construction material prices have risen 38.8% since February 2020, according to an Associated Builders and Contractors’ analysis of October Producer Price Index data.
Kurt Paulsen, professor of urban planning in the department of planning and landscape architecture at the University of Wisconsin at Madison, said building costs are already high from tariffs on Canadian lumber that Trump first imposed and that the Biden administration kept and increased.
“It used to be in construction that you would get a bid from a contractor or a subcontractor or supplier and it would be good for 60 days. Now, the bids are good for like five days because you don’t know where prices are going to be,” he said.
Immigration policy and its effect on construction labor
Trump tweeted on Nov. 18 that he is planning to use the declaration of a national emergency as part of his mass deportation plan.
Besides disrupting lives, Trump’s plan could have effects on what it costs to build housing, Hepp said.
“There is the cost of labor as well, if we do indeed have all these deportations. That’s a big, big concern,” she said. “A large share of labor in the construction industry obviously comes from immigrants. That is a huge issue for new construction and particularly new construction as it relates to affordable housing.”
Foreign-born construction workers made up 3 million of the 11.9 million people who work in the construction industry in 2023, according to the latest American Community Survey data.
Trump’s ‘not in my backyard’ rhetoric
The former president hasn’t always been clear on where he stands with zoning regulations and making way for more affordable housing in a wide variety of neighborhoods.
In a July Bloomberg interview, Trump spoke critically of zoning regulations and said that they drive up housing costs. But Trump also has a record of tending toward a “not in my backyard,” or NIMBY, approach to housing that maintained some of these zoning regulations. The Trump administration moved to roll back an Obama-era regulation that tied HUD funding to assessing and reducing housing discrimination in neighborhoods.
“He’ll talk about reducing regulations on developers, but he’ll also use this NIMBYism talking about protecting suburbs from low-income housing and you really can’t have it both ways,” said Sarah Saadian, senior vice president of public policy and field organizing at the National Low Income Housing Coalition.
Paulsen said Project 2025 embraces a pushback against anti-NIMBY approaches to expand multi-family housing.
“What I read in the Project 2025 documents is a clear statement that says every local community and neighborhood should be able to choose the housing it wants to accept or not. The challenge of that is that if every community in every neighborhood can veto housing, then we just don’t get enough housing and prices go up and prices and rents go up,” he said.
A more punitive approach to homelessness
Last year, homelessness rose to its highest level recorded since the U.S. Department of Housing and Urban Development began collecting this information in 2007. The ending of pandemic safety nets that gave some households better financial stability and a lack of affordable housing supply contributed to the number of unhoused people, the report explained.
Trump has been outspoken on his view that homeless people should be “off our streets.” The president-elect has also proposed putting unhoused people with mental health issues into “mental institutions.”
“There’s a movement that I think is largely reflected in Project 2025 that says, actually, cities need more coercive policy tools to enforce public order and to require that someone who’s camping take a shelter placement even if they don’t want it,” Paulsen said.
Saadian said that given the U.S. Supreme Court ruling in Grants Pass v. Johnson, which makes it easier to criminalize unhoused populations for sleeping outside, she’s worried about a changing political environment where policies that prioritize stable housing over policing fall out of favor.
“I think all of that just shows a culture shift in the political dynamic here that we’re definitely worried about,” she said.
President-elect Donald Trump says on his first day in office he would impose 25% tariffs on all imports from Canada and Mexico and 10% tariffs on goods from China until those countries stop the flow of illegal drugs and migrants into the U.S. (Getty photo illustration by Olivier Le Moal)
President-elect Donald Trump’s announcement Monday that he would impose harsh tariffs on the United States’ closest trading partners will work against his pledge to bring down consumer prices, Democrats in Congress and economists are warning.
In a pair of posts to his social media platform, Truth Social, on Monday evening, Trump said on his first day in office he would impose 25% tariffs on all imports from Canada and Mexico and 10% tariffs on goods from China until those countries stopped the flow of illegal drugs and migrants into the U.S.
“Thousands of people are pouring through Mexico and Canada, bringing Crime and Drugs at levels never seen before,” Trump wrote. “On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders. This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!”
While Trump has not always followed through on threats of stiff tariffs — generating doubts about how severe the next round will actually be — the executive branch does have wide latitude to impose the taxes on foreign goods without congressional approval, meaning it is likely Trump will act in some way.
“We are going to get several tariff threats via rage-posts over the next four years,” Brendan Duke, a senior director for economic policy at the liberal Center for American Progress, said in an interview. “Unclear what exact levels on what exact countries he is going to pursue.”
What about inflation?
Tariffs are consistent with Trump’s preference for a protectionist trade policy, but may actively hurt in an area that was key to his election win over Democratic Vice President Kamala Harris this month: taming inflation.
An analysis from the Center for American Progress said the tariffs Trump announced Monday would raise annual costs for the average U.S. family by $1,300.
Democratic members of the U.S. House Ways and Means Committee, which oversees tax and trade policy, estimated tariffs favored by Trump would increase consumer costs by up to $4,000 per year.
According to CBS News exit polling, 78% of voters said inflation was a moderate or severe hardship. Trump won voters who rated the economy as bad by 40 points over Harris.
Cars, ag and energy to be hardest-hit
About 15% of goods consumed in the United States are imported, Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics, an economics research center, said.
Adding across-the-board tariffs on those imports would contribute to consumers’ overall cost of living, even without considering related economic consequences.
“You’ve added to inflation, and that’s assuming that U.S. producers of similar products don’t jack up their prices,” he said. “But experience shows that if the economy is strong, they’ll do just that.”
The U.S. automotive sector, which is heavily integrated with Mexico and Canada with parts of a single vehicle produced in all three countries, could see “pretty startling” price increases, Hufbauer said.
Additionally, the U.S. imports Mexican fruits and vegetables and Canadian oil, complicating Trump’s campaign promise to bring down prices specifically of groceries and gas, Duke said.
“Americans have obviously been frustrated with the cost of food and the cost of gas,” he said. “Some parts of the United States are heavily reliant on Canadian oil, even though we’re a net exporter … So, one would expect price increases, especially in places like the Midwest that are heavily dependent on Canadian oil.”
Tariffs on Chinese goods would increase the costs of electronics, clothing and other consumer goods, Duke said.
Democratic legislation
Ways and Means Democrats, led by Washington’s Suzan DelBene and Virginia’s Don Beyer, and also joined by Earl Blumenauer of Oregon, Terri Sewell of Alabama, Steven Horsford of Nevada, Dan Kildee of Michigan and four others, introduced a bill Tuesday to rein in the executive’s ability to implement tariffs, citing the added cost to American families.
“The American people have clearly and consistently said that costs are one of their top concerns,” DelBene said in a statement. “Imposing sweeping tariffs on imported goods would raise prices on consumer products by thousands of dollars a year according to estimates. Not only would widespread tariffs drive up costs at home and likely send our economy into recession, but they would damage our trade relationships with allies and likely lead to significant retaliation, hurting American workers, farmers, and businesses.”
Trump’s promises of dramatic tariffs go beyond the intent of the law that gave the president the power to enact tariffs, the Democrats said. Congress wanted a president to be able to quickly impose tariffs on hostile foreign countries, but did not intend “to allow a president to indiscriminately impose tariffs without Congress’ approval.”
Tariffs can be an important tool for conducting foreign policy, but the range Trump is proposing is 10 to 20 times beyond what even he did in his first term, Duke said.
He cautioned that the final form of new tariffs may not be exactly what Trump proposed Monday night, though they could be similar.
“He’s gonna do something on tariffs. I don’t know what. It’s probably not these exact levels on these exact countries,” he said. “But it rhymes with it.”
Howard Lutnick, left, the CEO of Cantor Fitzgerald, was tapped by President-elect Donald Trump on Tuesday to be Commerce secretary in Trump's second administration. Lutnick is shown in this photo at a Trump rally at Madison Square Garden in New York City with billionaire entrepreneur Elon Musk on Oct. 27, 2024. (Photo by Ashley Murray/States Newsroom)
WASHINGTON — President-elect Donald Trump announced Tuesday he will nominate transition co-chair and billionaire businessman Howard Lutnick as the country’s next secretary of Commerce, a position that will have a hand in shaping Trump’s tariff policies.
If confirmed by the Senate, Lutnick would lead a 13-bureau department that houses the U.S. International Trade Commission, where tariff policy is managed. Trump campaigned on levying at least 10% tariffs on all foreign products and steep targeted tariffs on Chinese and Mexican imports upwards of 60%.
“He will lead our Tariff and Trade Agenda, with additional direct responsibility for the Office of the United States Trade Representative,” Trump said in a brief statement on his social media platform, Truth Social.
Trump also praised Lutnick’s role on his transition team, crediting him with creating “the most sophisticated process and system to assist us in creating the greatest Administration America has ever seen.”
Lutnick is CEO of the large financial services firm Cantor Fitzgerald, which lost more than 650 employees in the 9/11 terrorist attacks on New York City’s World Trade Center. Lutnick became known for rebuilding the company afterward and establishing a multimillion-dollar fund for the victims’ families.
The CEO is a backer of cryptocurrency and reportedly was in the running for Trump’s choice for Treasury secretary, though according to The Bulwark, lost the bid because he annoyed advisers at Mar-a-Lago. Billionaire Elon Musk, who has been tapped by Trump to lead a not-yet-defined commission to evaluate government spending, backed Lutnick for the Treasury post.
Lutnick was a featured speaker at Trump’s October Madison Square Garden campaign rally, an event infamous for a comedian calling Puerto Rico “an island of garbage” and where former Fox News personality Tucker Carlson joked about Vice President Kamala Harris’ race.
“We must elect Donald J. Trump president because we must crush jihad,” Lutnick said on stage after telling the story of losing employees on 9/11.
During his speech, Lutnick assailed income taxes and advocated for a return to the “rockin’” U.S. economy at the turn of the 20th century.
“All we had was tariffs, and we had so much money that we had the greatest businessmen of America get together to try to figure out how to spend it,” Lutnick said.
The United States is now “letting the rest of the world eat our lunch,” Lutnick said.
Lutnick, who spoke before Musk took the stage, introduced the fellow billionaire as “the greatest capitalist in the United States of America” and bantered with him about cutting $2 trillion in federal spending.
Economists across the political spectrum warn increasing tariffs will cost typical American households up to $2,600 annually and potentially cause a trade war.
Tesla owner Elon Musk, right, was hardly alone in the tech sector in supporting the reelection efforts by Donald Trump, left. Many Silicon Valley investors and innovators were hoping for a lighter regulatory hand than they have seen under President Joe Biden. (Photo by Brandon Bell/Getty Images)
Some venture capital investors, who have funded the tech boom in Silicon Valley and beyond, say they are excited by the prospect of a lighter regulatory environment under a new Trump Administration than they saw under President Joe Biden.
But they warn that Trump policies that will benefit many technology companies may come at a cost to other pro-Trump voters.
The Bay Area bubble of Silicon Valley, which is home to institutional tech giants like Apple, Google, Intel and Adobe, had been previously seen as a left-leaning region, like many other California communities. But the 2024 election was a unique one, venture capitalists and founders say.
“There’s been a significant shift in the valley rightward since the last election,” said Joe Endoso, a Silicon Valley investor. “And you’ve seen that in the financial flows — in the level of dollars — that were directed towards supporting President Trump’s campaign from the technology sector.”
Endoso, president of financial tech platform Linqto, said some tech industry people who previously voted for progressive issues and candidates this time cast their ballot for Trump. He said he’s heard more concern about potential regulations in the tech industry and negative economic effects under continued Democratic leadership.
This turn toward Trump wasn’t universal in the Valley. The majority of donations from employees at companies like Google, Amazon and Microsoft went toward Democratic candidate Kamala Harris, Reuters reported in September. But tech billionaires like Elon Musk and venture capital investors, like Andreessen Horowitz co-founders Marc Andreessen and Ben Horowitz, poured millions into his campaign.
While Trump didn’t receive unanimous support from the tech sector, many American tech giants and investors are excited about the light-handed approach to tech regulation that’s likely to come in the next four years. Congress has struggled to pass any federal laws around emerging technology like AI, though states have done so on their own on issues like data privacy, transparency, discrimination, and on how AI-generated images can be used.
The Biden administration, however, on its own issued a number of “best practice” guides for emerging technologies and aggressively pursued antitrust cases against some tech giants, including an ongoing case against Google that could force the company to spin off its popular Chrome web browser.
It appears unlikely that Trump will continue the Biden era regulatory and enforcement drives.
Those working in emerging technologies like AI are making advancements so quickly that regulators are unlikely to be able to keep up anyway, Endoso said. The tech industry mindset — move fast and break things, first coined by Facebook founder Mark Zuckerberg — will likely continue under Trump’s administration.
“You’re running through walls and hoping that when the regulations come about, they’re not going to be so, you know, restrictive,” Endoso said. “But you’re not going to sit and wait for the regulators. You can’t afford to.”
Why care about the VC market?
Venture capitalists pour money into many promising startups in Silicon Valley and elsewhere, looking for the ones that will create lucrative new technologies or “disrupt” existing ones. Silicon Valley successes include Uber, which received its first round of venture capital investment for just about $1.3 million in 2010, and Airbnb, which started with just a $20,000 investment in 2008. Today, the companies are worth $146 billion and $84 billion, respectively.
The high-risk, high-reward nature of the industry makes for a rarified business, and there’s a high barrier to entry. To become an accredited venture capital investor, one must have an income of at least $200,000 a year, or be worth $1 million. The handful of firms pouring the most money into the United States technology market are usually worth billions.
Yet, the technology being developed and funded by wealthy investors today will shape the next decade of everyone’s lives. Some of the most influential technology in the global economy has been released under President Joe Biden’s administration in the last three and a half years.
Advancements in generative AI and machine learning technology, rapid development of augmented and virtual reality, further adoption of cloud computing and Internet of Things (IoT) technologies, such as internet connected appliances and home devices, along with automation of many industries have already shifted much of American life. ChatGPT, one of the most recognizable examples of generative AI that the public can use, was only released two years ago, but the sector of generative AI is already threatening many American jobs.
Those with writing-focused careers like copywriters and social media marketers, are already feeling the disruption, and experts believe STEM professionals, educators and workforce trainers and others in creative and arts fields are going to see much of their job responsibilities automated by AI by 2030.
The venture capital market has been a volatile one over the last four years. Though many of Trump’s attacks on Democrats during his campaign cycle centered on the healthy economy under his first term, the COVID-19 pandemic was the single-biggest economic factor to disrupt the venture capital market and others.
The U.S. saw its biggest year for venture capital investments in 2021, but supply-chain issues and the continuing reliance on remote work changed the trajectory of many companies’ plans to go public on the stock market. High inflation and interest rates have kept many investors from deploying capital and many companies from completing mergers and acquisitions since then, although the second half of 2024 is looking up.
The economy quickly became the number one issue for Americans in the presidential election cycle. And though thriving venture capital markets usually benefit those that are already wealthy enough to invest, we’ll likely see a positive correlation in the general markets too, said Scott Nissenbaum, president and CEO of Ben Franklin Technology Partners, an innovation-centered fund in Pennsylvania.
“A thriving, efficient market is good for venture capital. And the flip side is also true,” he said. “We feed into and create the innovations and the efficiencies and the next generation … that create the robust and the boom.”
How investors and founders are preparing for Trump
Nissenbaum predicts that Trump may remove regulations for technology used by U.S. transportation and military systems, allowing for more tech integration than previously permitted without human safeguards in place. That might look like more flight optimization technology, or more drone usage by military branches. Nissenbaum also thinks Trump will attempt to open up space travel, especially with big backing by Musk, who runs SpaceX.
Health care also has been implementing technology rapidly, and Nissenbaum believes could see some major changes under Trump.
That is of note for healthtech founder Sipra Laddha, an Atlanta-based psychiatrist and cofounder of LunaJoy, which provides in-person and virtual wellness visits for women. The three-year-old company raised venture capital in 2022 and 2023, despite a more challenging fundraising market. Women’s health care companies saw a surge of VC investment in the wake of the overturning of Roe v. Wade in June 2022, an exception to the generally slower investment market at the time.
But she is uncertain about how Trump’s potential cabinet appointees, like Robert F. Kennedy Jr., who was appointed to head the Department of Health and Human Services, will affect LunaJoy’s operation. Kennedy has made health a key issue in his public advocacy and political activity, but he has also espoused eccentric and even false views on issues such as vaccines and pharmaceuticals.
“When women don’t have choices, mental health is significantly worse, and that’s something that goes on, often, for the entire time of that family’s trajectory,” Laddha said. “So I’m not quite sure what’s going to happen, but you know, those are certainly things that, as a women’s mental health company, we are looking at and watching closely to see what sort of legislation, rules and laws come out.”
When it comes to fundraising early next year, Laddha is optimistic. She’s focused on how fragmented the healthcare industry is right now, and plans to showcase how companies like hers will aim to integrate with larger health systems.
“Our role is to be really as disruptive as possible, and to bring to the forefront the most innovative solutions that we can do while still working within the current framework of healthcare that exists today,” she said.
Some sectors worry about Trump economic policy
While software and cloud-based technologists seem excited by the effects of deregulation, startup founders that make physical products, especially using microchip technology, are wary of Trump’s plan to impose tariffs on imported goods.
Samyr Laine, a managing partner at Los Angeles-based Freedom Trail Capital, specializes in consumer tech and consumer packaged goods. Laine said he feels a sense of relief in ending the “uncertainty” around who will take the presidency the next four years, but he predicts many founders will feel the costly effects of Trump’s planned tariffs, and pass those additional costs to consumers.
Though the existing companies in his portfolio won’t be hit too hard, it’s a factor they’ll be forced to review when considering investments in companies in the future. Those that will incur the additional costs of imported goods will have to adjust their profit margins and might not be as attractive to investors.
“As a consumer and someone who isn’t in the space, not to be like a fear monger, but expect that some of the things you typically pay for, the price will go up,” Laine said.
The effect on work
Although Trump was successful in picking up a significant amount of tech industry elite support this election season, much of his voter base is working class people who will not feel the positive effects of tech industry deregulation.
Endoso, the Silicon Valley investor and founder, says the Trump coalition of tech entrepreneurs and working-class voters represents “a division between the haves and the have-nots.” The usual basis on which people pick their electoral preferences, like race, geography, income and proximity to city life, were “shattered” this time around.
“It was a revolt of the working class, at least in my view,” he said.
The advancements of AI and machine learning, which will enrich the investor class, will have large implications on employment for those working class voters. The vast majority of Americans who are not college educated, and work physical jobs, might struggle to thrive, he said. We’ll likely see overhauls of industries as robots replace and automate a majority of physical labor in warehouses, and self-driving vehicles take over jobs like long-haul trucking and ride services such as Uber and Lyft.
“I think those are important questions to be asking from a policy standpoint, and I think that the intelligent answers shouldn’t be ‘let’s shut the innovation down.’” Endoso said. “That didn’t work in 19th century England. It won’t work here today, right? But it does require our rethinking the definition of work, and the definition of how you … organize a society along lines where you don’t need to have the same level of maybe direct labor input as we had in the past.”
Nissenbaum agreed, saying that AI has already begun to leak into every field and industry, and will only continue to disrupt how we work. As revolutionary as the internet and internet companies were in the late 1990s, the web has become the infrastructure for artificial intelligence to become more efficient and effective at everything it does.
With lighter regulation under a new Trump administration, we’re likely to see AI develop at unpredictable rates, he said. And laborers will definitely be feeling the effects over the next four years.
“You’re not going to lose your job to AI,” Nissenbaum said. “You’re going to lose your job to someone who understands how to do your job with AI.”
Sale prices are displayed for items at a grocery store in San Rafael, California, on Sept. 10, 2024. Grocery prices are just one piece of the U.S. economy, which is key to many voters in their pick for president. (Photo by Justin Sullivan/Getty Images)
The economy is key to many voters in their pick for president, but that fervor also makes it an attractive subject for distortions, misinformation, and oversimplification.
Nearly eight in 10 U.S. voters say that the economy is one of the most important issues to them in this upcoming presidential election, according to an AP-NORC poll conducted in September. Although 66% of voters say the economy is very or somewhat poor, six in 10 also say their personal finances are good.
Millions have already cast their ballots through early or mail voting. But those who are still deciding between the two main candidates – Democrat Kamala Harris and Republican Donald Trump – have until Nov. 5 to wade through various myths and exaggerations to understand the state of the economy and each candidate’s record on related issues.
What is the state of inflation in the U.S.?
The most recent cycle of inflation reached its peak in June 2022 at 9.1%. Inflation has fallen considerably since then and to a more manageable 2.4% in September’s Consumer Price Index, a measure of inflation. Wage growth, meanwhile, has beaten inflation for more than a year. The Federal Reserve cut its key interest rate by half of a percentage point for the first time in four years in September after inflation neared toward its goal of 2%.
But those macro figures don’t hit home with everyone, because of the prices of groceries and other essentials.
The literal prices that people see on goods make them think that they’re not doing as well because they feel that they are higher than they think they should be,” said Elise Gould, senior economist at the left-leaning Economic Policy Institute But, those prices are actually lower as a share of their wages than they were four years ago.”
This doesn’t mean that many voters’ experiences of struggling to afford basic items aren’t real. The cost of housing is very high and puts a strain on people’s budgets. The Fed’s interest rate policy affected credit card rates, and thus, people’s ability to make purchases.
Gould said that despite the positive news of slowing inflation, the lack of long-term wage growth before this recent increase has been hard on many Americans.
“Even though things are good, we know that for the vast majority of people over the last several decades, they’ve been faced with relatively slow wage growth and so it can be hard to feel like you’re going to get ahead,” she said.
Was unemployment higher under Biden or Trump?
The unemployment rate under Donald Trump was fairly low, at 4.7%, when he took office in 2017 , and it mostly trended lower until the beginning of the pandemic. It then shot up to 14.8% in April 2020 and fell sharply for the rest of Trump’s term, which ended in January 2021. The unemployment rate was 6.7% during Trump’s last full month in office.
The labor market has been fairly hot under President Joe Biden. The unemployment rate was 6.4% during the month he and Harris were sworn into office. But since then, it largely fell, and from February 2022 to April 2024, the unemployment rate was below 4%. In September, the unemployment rate was 4.1% but the economy continues to show strong job growth.
Looking at the Biden-Harris administration’s record and Trump’s record outside of the immediate economic impact of the recession and supply shocks during their presidencies, unemployment remained fairly low. Overall, unemployment averaged 3.8% since 2022 and averaged 4% between 2017 and 2019, before the pandemic hit the economy in 2020.
Labor force participation rates and the employment-to-population ratio, measures of the number of people in the labor force and workers employed versus the working age population, were high in the last jobs report and show signs of a healthy labor market.
Skanda Amarnath, executive director of Employ America, a left-leaning group focusing on economic policies, said that it’s also important to understand the percentage of the population adjusting for age, the prime age employment rate. It is marginally higher now, by about 0.3%, than it was right before Covid struck, during the Trump administration, he said.
“We’ve seen generally slower paces of employment gains more recently and that might be just because a lot of people are now back in the labor force itself. It’s probably a little harder to grow employment quickly when you’re coming from a high level as opposed to a low level,” Amarnath said. “Nevertheless, we’re at an employment rate where there’s been a reasonably strong labor demand, a little bit combined with the fact that people are also moving out into their retirement years.”
The American Rescue Plan Act, CHIPS and Science Act, Inflation Reduction Act, and bipartisan infrastructure deal, enacted during Biden’s presidency, helped fuel the recovery, Amarnath said. The CARES Act, which was signed into law byTrump, likely helped the U.S. avoid a protracted recession, he added.
What would Trump’s proposed tariffs do to the U.S. economy
In an interview with John Micklethwait, editor-in-chief of Bloomberg News at the Economic Club of Chicago on Oct. 15, former president Trump said tariffs would be good for economic growth.
“We’re going to bring companies back to our country … We’re going to protect those companies with strong tariffs because I’m a believer in tariffs,” he said.
The Trump campaign has also proposed a 60% tariff on goods from China, one of the U.S.’s largest trading partners, and 10-to-20% on other imports. The Tax Foundation, a business-friendly research think tank, estimated that if Trump’s proposed tariffs were to be implemented, it would reduce GDP by at least 0.8% and eliminate 684,000 jobs.
Tariffs would likely result in lower trade and retaliatory tariffs from other countries, raising prices, and costing each household between $1,900 to $7,600 in 2023 in dollars, according to the Budget Lab at Yale, a nonpartisan policy research center.
“If the tariff wars back in President Trump’s first term are any indication, they’re going to respond with their own tariffs and other trade actions,” said Mark Zandi, chief economist at Moody’s Analytics. “Broadly, tariffs are going to raise prices for imported goods, weaken consumer purchasing power and slow growth.”
Zandi added that although the retail sector would be particularly hard hit by these tariffs, he doesn’t think any industry would come away unscathed by the policy.
How do Harris and Trump’s economic plans compare?
Harris has said her plans, which include building more affordable housing supply, restoring and expanding the child tax credit, and supporting legislation to expand labor rights, have been approved by respected economists and sources of financial research.
“Please do check out the Wall Street Journal or Goldman Sachs or the 16 Nobel laureates or Moody’s, who have all analyzed the plans and said mine will strengthen the economy, his will make it weaker,” Harris said.
The reality is a little more complicated. Some of the reports Harris referred to do not say the economy would weaken under Trump but would grow less than the economy under Harris in certain scenarios, depending on the political breakdown in Congress.
Others show the GDP falling more as a result of Harris’ proposals. The Penn Wharton Budget Model looking at Trump and Harris proposals shows the GDP falling 0.4% under Trump by 2034 and declining 1.3% under Harris over the same period, but notably, it does not factor in proposals not to tax tips, mentioned by both candidates, or Trump’s tariff policies.
Before Biden withdrew his candidacy, 16 Nobel-prize winning economists said Biden’s investments in the economy through signing legislation to improve infrastructure and manufacturing would boost economic growth. They spoke out against Trump’s tariff plans. Although Harris is part of the Biden administration, they did not address her specific plans as a candidate. On Wednesday, 23 Nobel-prize winning economists, including the economist who led the last letter, Joseph Stiglitz, endorsed Harris’ specific policies.
The Republican presidential nominee, former U.S. President Donald Trump, on Tuesday, Oct. 15, spoke to the Economic Club of Chicago. In this photo, he speaks to attendees during a campaign rally at the Mosack Group warehouse on Sept. 25 in Mint Hill, North Carolina. (Photo by Brandon Bell/Getty Images)
Republican presidential nominee Donald Trump defended his plans for steep tariffs on Tuesday, arguing economists who say that those higher costs would get passed onto consumers are incorrect and that his proposals would benefit American manufacturing.
During an argumentative hour-long interview with Bloomberg Editor-in-Chief John Micklethwait hosted by the Economic Club of Chicago, Trump vehemently denied tariffs on certain imported goods would lead to further spikes in inflation and sour America’s relationship with allies, including those in Europe.
“The higher the tariff, the more likely it is that the company will come into the United States, and build a factory in the United States so it doesn’t have to pay the tariff,” Trump said.
Micklethwait questioned Trump about what would happen to consumer prices during the months or even years it would take companies to build factories in the United States and hire workers.
Trump responded that he could make tariffs “so high, so horrible, so obnoxious that they’ll come right away.” Earlier during the interview, Trump mentioned placing tariffs on foreign-made products as high as 100% or 200%.
Harris-Walz 2024 spokesperson Joseph Costello wrote in a statement released following the interview that “Trump showed exactly why Americans can’t afford a second Trump presidency.”
“An angry, rambling Donald Trump couldn’t focus, had to be repeatedly reminded of the topic at hand, and whenever he did stake out a position, it was so extreme that no Americans would want it,” Costello wrote. “This was yet another reminder that a second Trump term is a risk Americans simply cannot take.”
Smoot-Hawley memories
Micklethwait noted during the interview that 40 million jobs and 27% of gross domestic product within the United States rely on trade, questioning how tariffs on those products would help the economy.
He also asked Trump if his plans for tariffs could lead the country down a similar path to the one that followed the Smoot-Hawley tariff law becoming law in June 1930. Signed by President Herbert Hoover, some historians and economists have linked the law to the beginning of the Great Depression.
Trump disagreed with Micklethwait, though he didn’t detail why his proposals to increase tariffs on goods from adversarial nations as well as U.S. allies wouldn’t begin a trade war.
The U.S. Senate’s official explainer on the Smoot-Hawley tariffs describes the law as being “among the most catastrophic acts in congressional history.” And the Congressional Research Services notes in a report on U.S. tariff policy that it was the last time lawmakers set tariff rates.
Desmond Lachman, senior fellow at the American Enterprise Institute, a conservative-leaning think tank, wrote last month that Trump’s proposal to implement tariffs of at least 60% on goods imported from China as well as 10 to 20% on all other imports could have severe economic consequences.
“It is difficult to see how such a unilateral trade policy in flagrant violation of World Trade Organization rules would not lead to retaliation by our trade partners with import tariff increases of their own,” Lachman wrote. “As in the 1930s, that could lead us down the destructive path of beggar-my-neighbor trade policies that could cause major disruption to the international trade system. Such an occurrence would be particularly harmful to our export industries and would heighten the chances of both a US and worldwide economic recession.”
CRS notes in its reports that while the Constitution grants Congress the authority to establish tariffs, lawmakers have given the president some authority over it as well.
The United States’ membership in the World Trade Organization and various other trade agreements also have “tariff-related commitments,” according to CRS.
“For more than 80 years, Congress has delegated extensive tariff-setting authority to the President,” the CRS report states. “This delegation insulated Congress from domestic pressures and led to an overall decline in global tariff rates. However, it has meant that the U.S. pursuit of a low-tariff, rules-based global trading system has been the product of executive discretion. While Congress has set negotiating goals, it has relied on Presidential leadership to achieve those goals.”
The presidency and the Fed
Trump said during the interview that he believes the president should have more input into whether the Federal Reserve raises or lowers interest rates, though he didn’t answer a question about keeping Jerome Powell as the chairman through the end of his term.
“I think I have the right to say I think he should go up or down a little bit,” Trump said. “I don’t think I should be allowed to order it. But I think I have the right to put in comments as to whether or not interest rates should go up or down.”
Trump declined to answer a question about whether he’s spoken with Russian leader Vladimir Putin since leaving office.
“I don’t comment on that,” Trump said. “But I will tell you that if I did, it’s a smart thing. If I’m friendly with people, if I have a relationship with people, that’s a good thing, not a bad thing.”
Journalist Bob Woodward wrote in his new book “War” that Trump and Putin have spoken at least seven times and that Trump secretly sent Putin COVID-19 tests during the pandemic, which the Kremlin later confirmed, according to severalnewsreports.
Trump said the presidential race will likely come down to Pennsylvania, Michigan and possibly Arizona.
The Economic Club of Chicago has also invited Democratic presidential nominee Kamala Harris for a sit-down interview.
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