A comprehensive analysis by the Peterson Institute for International Economics has cast doubt on the efficacy of former President Donald Trump's proposed economic policies, particularly in addressing the affordability crisis in the United States. The study suggests that Trump's agenda, which includes significant tariffs, large-scale deportations, and influencing Federal Reserve decisions, could exacerbate inflation, stifle economic growth, and reduce employment rates.

The working paper, authored by Warwick McKibbin, Megan Hogan, and Marcus Noland, presents a grim outlook, stating that Trump's policies could have a more detrimental impact on the U.S. economy than on any other economy globally. In a scenario with minimal retaliation and deportations, employment could drop by 2.7%, inflation could reach 6%, and consumer prices could soar by 20% by 2028. In a more severe scenario with retaliatory tariffs and mass deportations, the figures are even more stark, with employment falling by 9%, inflation surging to 9.3%, and GDP dropping by 9.7%.

The Trump campaign has countered these findings, arguing that past predictions of economic downturns due to Trump's policies have been proven incorrect, and that his policies will continue to stimulate growth, reduce inflation, and support American manufacturing.

The analysis highlights the potential for a loss of Federal Reserve independence to lead to "permanently higher inflation" and a significant increase in prices across the U.S. economy by 2040. The study also points out that Trump's immigration crackdown could have a Covid-like shock to the labor supply, particularly in sectors like agriculture, leading to a permanent loss of supply and increased food costs.

On trade, the research indicates that Trump's tariff proposals could backfire, causing a recession and hurting manufacturing more than any other sector. This contradicts Trump's claims that tariffs would create a manufacturing renaissance in the U.S.

The findings of the Peterson Institute come amidst a poll that suggests the economy is the top concern for voters, with likely voters expressing more trust in Trump to handle the economy compared to Vice President Kamala Harris.

The paper's author, Warwick McKibbin, emphasizes the importance of an independent central bank, noting that countries with such institutions have lower inflation rates. Federal Reserve Chairman Jerome Powell also cautioned against interference with the Fed's independence, stating that it serves all Americans and not just those in office.