Donald Trump’s proposed economic strategies could drive the United States into a recession, according to a stark warning from a leading economist. Paul Mortimer-Lee, an economist at the National Institute of Economic and Social Research (NIESR), expressed concerns over the potential fallout from a combination of sweeping tariffs, aggressive immigration policies, tax cuts, and government spending reductions.
A Recipe for Economic Downturn?
Mortimer-Lee described Trump’s policy proposals as “ill-conceived and rushed,” predicting they could lead to a contraction in the US economy by as much as two to three percentage points in the worst-case scenario. These remarks come against the backdrop of a US economy projected to grow by 2.8% in 2024.
“If large-scale deportations of immigrants occur, tariffs are imposed immediately, and retaliatory measures by trade partners are swift, GDP could see a sharp decline,” Mortimer-Lee said.
Such a downturn would contrast sharply with the robust economic performance expected this year and could undermine Trump’s campaign promise to boost economic growth and tackle rising living costs.
Global Ripple Effects
A recession in the world’s largest economy would have far-reaching consequences, with significant impacts on trade partners like China, Mexico, Canada, and Germany. These nations’ economies are deeply intertwined with the US and would likely experience disruptions in key industries.
The Core Concerns: Immigration and Tariffs
The economist highlighted Trump’s immigration policies as particularly damaging, noting the vital contributions of immigrant workers to industries such as agriculture, retail, and construction.
“Expelling five million undocumented workers could reduce GDP by up to 2.5%,” Mortimer-Lee stated. “The economic impact wouldn’t be a one-time shock but a persistent drag on growth over several years.”
Similarly, imposing steep tariffs—including rates of up to 60% on imports from China—could lead to higher consumer prices, stoking inflation. Coupled with reduced labor availability, this would create significant upward pressure on wages.
Inflation and the Federal Reserve’s Role
The Federal Reserve’s ability to respond to rising inflation may also come under threat. Mortimer-Lee warned that Trump’s influence on monetary policy could result in a “softer stance” and prevent interest rates from being raised effectively to combat price increases. This scenario, he added, could push inflation to 7% or 8% by 2027.
“Trump’s emphasis on a more direct presidential role in setting interest rates raises concerns about the Federal Reserve’s independence,” Mortimer-Lee said. Speculation around potential changes in Fed leadership, including the removal of Chairman Jerome Powell, has fuelled fears of a politicised monetary policy.
International Confidence and Fiscal Risks
Foreign investors may also become wary of lending to the US if the Federal Reserve’s independence is undermined, potentially leading to higher borrowing costs. Mortimer-Lee warned of cascading risks such as fiscal tightening, funding crises, and even a “dollar crisis” if confidence in US financial stability erodes.
Balancing Risks and Ambitions
Despite Trump’s assurances that his policies aim to create jobs and strengthen the economy, experts caution that their implementation requires careful planning and consideration of potential ripple effects. Achieving efficiency in government spending, ensuring fair trade practices, and balancing labour force dynamics will be critical in avoiding an economic downturn.
