Trump's policies might cause a deep recession and stagflation, study says
President Donald Trump's policies on trade, government employment and immigration will cause an unnecessary economic recession if they're fully or almost fully enacted, while also boosting inflation, according to the UCLA Anderson Forecast.
While there is no immediate sign of one, the Trump administration should be warned that 'if all your wishes come true, you could very well be the author of a deep recession,' Clement Bohr, an economist for the organization, wrote on its website. 'And it may not simply be a standard recession that is being chaperoned into existence, but a stagflation.'
Recent economic indicators have been choppy, with consumption and the labor market holding up, but with indicators of sentiment cratering as increased uncertainty may prompt companies to hold off on fresh investments.
Much-higher tariffs will make it much more costly for American manufacturers to produce because of highly integrated cross-border supply chains, Bohr said. This will make some operations uneconomical. Retail and agriculture will also likely contract.
The construction sector is particularly vulnerable to the Trump administration's mass deportations because it relies heavily on immigrant labor, the forecast says. Historical data shows that past waves of deportations going back to the 19th century have led to reduced employment for the rest of the population.
The changes will boost both costs and prices, adding to inflation even as economic growth slows. And if the Trump administration succeeds in influencing monetary policy decisions, the Federal Reserve may be left without tools to contain rising prices.
And efforts by Elon Musk's Department of Government Efficiency to cut the federal workforce — including contractors and grant recipients — by 10% to 15% will lead to up to one million people losing their jobs, the largest single layoff event in U.S. history, Bohr wrote. The sector usually serves as a stabilizer for the labor market and broader economy.
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