特朗普第二任总统任期的国际经济影响-2024-10-宏观大势

WORKINGPAPER

24-20TheInternationalEconomicImplicationsofaSecondTrump

Presidency

WarwickMcKibbin,MeganHogan,andMarcusNoland

September2024

ABSTRACT

ThepaperexplorespoliciespromotedbyformerpresidentandnowcandidateDonaldTrumpthatwouldpotentiallyaffecttheglobaleconomy.Wefocusonimmigration

policy,trade,anderosionoftheFederalReserveBoard’spoliticalindependence.

EachpolicyhasdifferingmacroeconomicandsectoralimpactsontheUnitedStatesandothercountries.Wefind,however,thatallthepoliciesexaminedcauseadeclineinUSproductionandemployment,especiallyintrade-exposedsectorssuchas

manufacturingandagriculture,aswellashigherUSinflation.Thetradepoliciesdo

littletoimprovetheUStradebalance;however,theerosionofFedindependencedoessobycausingcapitaloutflows,asignificantdepreciationofthedollar,andhigher

unemploymenttowardtheendof2028,whichworsenAmericanlivingstandards.

Scenarioscombiningindividualpoliciesshowthatthechangescausealarge

inflationaryimpulseandasignificantlossofemployment(particularlyinmanufacturingandagriculture)intheUSeconomy.Thenegativeimpactofacontractioninglobal

tradeissignificantforcountriesthattradewiththeUnitedStatesthemost.The

adverseeffectisoffsetforsomeeconomiesbythepositiveeffectsofaninflowof

foreigncapitalthatwouldotherwisehavegoneintotheUSeconomy.An

online

dashboard

containsafullsetofmacroeconomicandsectoralresultsforallcountries.

JELcodes:F1,F13,F17,F22,F37,E58

Keywords:tradepolicy,migration,deportations,centralbankindependence,China,Trump

Authors’Note:WethankMauryObstfeld,AdamPosen,NellHenderson,AyhanKose,AndyStoeckel,EgorGornostay,DavidWilcox,andparticipantsataPIIEseminarforhelpfulfeedbackandRoshenFernando,GeoffreyShuetrim,andJingYanforexcellenttechnicalsupport.

ThePetersonInstituteforInternationalEconomicshasnopartisangoalinpublishingthisresearch.

Ourconcernsareaboutthepolicies,notthecandidate.Ourobjectiveistoeducatepolicymakersand

thepublicabouttheeffectsthesepolicieswouldhaveonAmericansandotherpeoplearoundtheworld.

WarwickJ.McKibbin

,

nonresidentseniorfellow

atthePetersonInstitutefor

InternationalEconomics,is

DistinguishedProfessorof

EconomicsandPublicPolicyanddirectoroftheCentre

forAppliedMacroeconomicAnalysisintheCrawford

SchoolofPublicPolicyattheAustralianNationalUniversity.

MeganHogan

wasaresearchfellowatthePeterson

InstituteforInternational

EconomicsuntilAugust2024.ShejoinedtheInstituteasaresearchanalystinAugust

2021andwastheEranda

RothschildFoundationJuniorFellowduring2022–23.

MarcusNoland

,executive

vicepresidentanddirectorofstudiesatthePeterson

InstituteforInternational

Economics,hasbeen

associatedwiththeInstitutesince1985.From2009

through2012,heservedastheInstitute’sdeputy

director.Heisalsoa

seniorfellowattheEast-WestCenter.

1750MassachusettsAvenue,NW|Washington,DC20036-1903USA|+1.202.328.9000|

1

INTRODUCTION

Withhiselectionin2016,DonaldTrumpshatteredapoliticalconsensusthathadheldsincethe

GreatDepression,thataliberal,US-led,rules-basedinternationaltraderegimewasinthe

UnitedStates’nationalinterest.Onceinoffice,PresidentTrump,byandlarge,madegoodonhisnationalistandprotectionisttradeandimmigrationpolicycampaignpromises,pullingtheUnitedStatesoutoftheTrans-PacificPartnershipnegotiationduringhisfirstweekinoffice;launchingtradewars,particularlywithChina;renegotiatingexistingfreetradeagreementstomakethemmorerestrictive;increasingdeportationsandattemptingtobanimmigrantsfrompredominatelyMuslimcountries(Noland2020).Inshort,Trumpfollowedthroughonmany

(thoughnotall)ofhiscampaignpromises.

Now,Trumpisbackasthe2024RepublicanpresidentialnomineeandispromotingthedeportationofmillionsofpeoplefromtheUnitedStates,steepertraderestrictions,andthe

erosionoftheFederalReserve’spoliticalindependence.Thetenorofthesepoliciesand

Trump’strackrecordofkeepinghispromisesjustifyanalyzingtheirpotentialimpact.Wefindthatironically,despitehis“maketheforeignerspay”rhetoric,thispackageofpoliciesdoes

moredamagetotheUSeconomythantoanyotherintheworld.TheyresultinlowerUSnationalincome,loweremployment,andhigherinflationthanotherwise.Insomecases,foreigncountriesbenefitfromtheinflowofcapitalleavingtheUnitedStates.

Atthisjunctureonemightask,whyTrump?WhynotalsoanalyzethepolicyproposalsofVicePresidentKamalaHarris,theDemocraticPartynominee?Harris,perhapsfor

understandablereasonsconnectedtothetimingofherlateemergenceasapresidential

candidate,hasnotproposedanymajordeparturesfromtheBidenadministration’spoliciesandnonewithassignificantinternationaleconomicimplicationsasTrump’s.TotheextentthatanynewpoliciesoftheDemocraticParty’scandidateinvolvesuchchangesintradepolicy,

immigration,orFedindependence,theanalysisinthispaperisrelevantforthepoliciesindependentlyofwhichpresidentimplementsthem.

POLICIESTOBEEXAMINED

Restrictionsonimmigration,bothlegalandunauthorized,haveplayedacentralroleinTrump’s

campaignsfrom2016throughthisyear:Heonceagainplansto“buildthewall”alongtheUS-Mexicoborder,restrictbothlegalandillegalimmigration,andsubjectvisaapplicantsto

“extremevetting.”Trumpalsoisproposingmuchmoreextremeimmigrationrestrictions,

includingendingbirthrightcitizenshipforUS-bornchildrenofunauthorizedimmigrants,

sweepingImmigrationandCustomsEnforcement(ICE)raidsofworkplaces,andrevoking

humanitarianparole.Forthispaper,wefocusonTrump’sproposalsformassdeportationsofunauthorizedimmigrants,whichhehaspromisedtoinitiateonhisfirstdayinoffice.

Trumphasrepeatedlyvowedtocarryoutthe“largestdomesticdeportationoperationinAmericanhistory,”

1

targetingwhathesaysarethe15millionto20millionunauthorized

1See,forexample,“FormerPresidentTrumpSpeaksatCPAC,”March4,2023,

https://www.c-

/video/?526456-1/president-trump-speaks-cpac

and“Trumpannounces'largestdeportationinAmericanhistory'ifheisreelected,”

/watch?app=desktop&v=2ks12ctSXwg.

2

immigrantsintheUnitedStates,approximately8.3millionofwhomarethoughttobeinthe

workforce.

2

ThegoalisalsoendorsedintheRepublicanPartyplatform.

3

Trumpplanstomodelthismassdeportationafter“OperationWetback”—a1956campaignundertheEisenhower

administrationthatdeported1.3millionpeople.

4

Thecampaignused“military-styletactics”toroundupandremoveMexicanimmigrantsfromtheUnitedStates.

5

Trumphasindicatedthatheenvisionsusinglocallawenforcement,theNationalGuard,andthestandingarmytoimplementthisplan,“movingthousandsoftroopscurrentlystationedoverseas”totheUS-MexicoborderandinvokingtheInsurrectionActof1807topermitthe

militarytoarrestunauthorizedimmigrants.

6

Tospeedupthepaceofdeportations,TrumpplanstochangeICEdeportationprocedures,permittingICEagentstoconductworkplaceraidsratherthanexclusivelyarrestindividualpeople.Similarly,Trumpplanstodenydueprocessto

unauthorizedimmigrantsandsuspectedmembersofdrugcartelsandcriminalgangs.

7

To

alleviatetheburdenplacedonexistingICEdetentionfacilities,Trumpplanstobuildenormousdetentionfacilitiesalongthebordertoholdmigrantswhiletheyawaitdeportation.

2“ReadtheFullTranscriptsofDonaldTrump’sInterviewsWithTIME,”

/6972022/donald-trump-

transcript-2024-election/.

Approximately8.3millionUSworkersin2022wereunauthorizedimmigrants,accordingtonewPewResearchCenterestimatesbasedontheAmericanCommunitySurvey.Thisnumberisupfrom7.4

millionin2019.SeeJeffreyS.PasselandJensManuelKrogstad,"Whatweknowaboutunauthorizedimmigrants

livingintheU.S.,"ShortReads,PewResearchCenter,July22,2024

,/short-

reads/2024/07/22/what-we-know-about-unauthorized-immigrants-living-in-the-us/.

3See2024RepublicanPartyPlatform,TheAmericanPresidencyProject,

/documents/2024-republican-party-platform.

4CharlieSavage,JonathanSwan,andMaggieHaberman,“ANewTaxonImportsandaSplitFromChina:Trump’s

2025TradeAgenda,”NewYorkTimes,December26,2023,

/2023/12/26/us/politics/trump-2025-trade-china.html;

“ReadtheFullTranscriptsofDonaldTrump’sInterviewsWithTIME,”

/6972022/donald-trump-transcript-2024-election/.

5“OperationWetback”followedadramaticincreaseinlegalopportunitiesforMexicanstogaincitizenshipinthe

UnitedStates;millionsofMexicanshadlegallyenteredtheUnitedStatesthroughjointimmigrationprogramsfrom1900to1950.“OperationWetback”soughttoreversethistrend,andindeed,amongthosedeportedwere

Americancitizens.SeeErinBlakemore,"TheLargestMassDeportationinAmericanHistory,"HISTORY,

/news/operation-wetback-eisenhower-1954-deportation.

6TrumpendorsesusingthemilitarytodeportunauthorizedmigrantsinhisinterviewwithTIMEMagazine:“Read

theFullTranscriptsofDonaldTrump’sInterviewsWithTIME,”

/6972022/donald-trump-

transcript-2024-election/.

InaninterviewwiththeNewYorkTimes,StephenMiller(Trump’simmigrationczarandformersenioradvisortothepresidentoftheUnitedStates)explicitlyendorsesinvokingtheInsurrectionActof

1807tooverridethePosseComitatusActandallowthemilitarytodeportmigrants.SeeCharlieSavage,MaggieHaberman,andJonathanSwan,“SweepingRaids,GiantCampsandMassDeportations:InsideTrump’s2025

ImmigrationPlans,”NewYorkTimes,November11,2023,

/2023/11/11/us/politics/trump-2025-immigration-agenda.html.

7Expeditedremoval”isaformofdeportationthatdeniesunauthorizedimmigrantshearingsandtheopportunitytofileappeals.Trumpplanstoexpandexpeditedremoval,asthe1996IllegalImmigrationReformandImmigrantResponsibilityActsubjectsimmigrantstoexpeditedremovalforuptotwoyearsafterarrival,inthemeantime

employingtheobscureAlienEnemiesActof1798todeportsuspecteddrugcartelandgangmemberswithoutdueprocess,asthelawallowsfordeportationofthosewhohaveengagedin“predatoryincursions.”Onthe1996Act,seeAmericanImmigrationCouncil,"APrimeronExpeditedRemoval,"FactSheet,December12,2023,

/research/primer-expedited-removal.

Foradiscussionofthe1798law,seeSavage,Swan,andHaberman,“ANewTaxonImportsandaSplitFromChina:Trump’s2025Trade

Agenda.”

3

SomehavequestionedwhetherTrumpcouldachievethesegoals.ItisworthnotingthatTrumpsimilarlyvowedtocarryoutmassdeportationswhenrunningforofficein2016,butonlymanagedseveralthousanddeportationseachyear,lessrelativetotheprecedingObamaand

succeedingBidenadministrations.

Thistime,whatappearstobedifferentismuchgreaterattentiontothelogisticsof

large-scaleoperations.Withrespecttothelow-endgoalof1.3milliondeportations,itishardtoimaginethattheUSgovernmenttodaycouldnotachieveatleastwhatwasdoneunderthe

Eisenhoweradministrationsevendecadesearlier.Thegoalofexpellingallunauthorized

workersinthelaborforceisobviouslyambitious,perhapsunrealisticallyso.Itispossiblethatifthedeportationoperationsweresufficientlybrutalandpublicized,itmightinducevoluntary

departures.Whilethislatterdistinctionmighthavepoliticalordiplomaticrelevance,itwouldnotmatterfromamodelingstandpoint.Similarly,somecountriessuchasVenezuelamight

refusetoacceptthedeportees,leavingtheminlimbo.Again,theseactionsmightmatterfordiplomaticorhumanitarianreasons,aslongasthedeporteesareremovedfromtheUSlaborforce,itwouldnotaffectthemodeling.

AsecondarenaofTrumpinternationaleconomicpolicyistrade.Theself-proclaimed

“tariffman”

8

isrunningonwhathehasdescribedasan“Americafirsttradeplatformthattakes[a]sledgehammertoglobalism,”vowingtoendrelianceonChina,createmillionsofjobs,and

growGDPthroughhighertariffsandimportrestrictions.

9

Trump’sproposedtradepolicies

includeimposingauniversalbaselinetariffofeither10percentagepointsor10additional

percentagepointsonallimportsintotheUnitedStates,possiblyincludingimportsfromfree

tradeagreementpartners;

10

levyinga60percentagepoints(ormore)tariffonallimportsfromChina;

11

andrevokingChina’spermanentnormaltraderelations(PNTR)status,formerlyknownasmostfavorednationstatus(Hogan,McKibbin,andNoland2024).

8SeeTrump’stweetonDecember4,2018,

/realDonaldTrump/status/1069970500535902208.

9See“Agenda47:PresidentTrump’sNewTradePlantoProtectAmericanWorkers,”February27,2023,

/agenda47/agenda47-president-trumps-new-trade-plan-to-protect-american-

workers.

10Onthe10percentglobaltariff,see“ReadtheFullTranscriptsofDonaldTrump’sInterviewsWithTIME,”

/6972022/donald-trump-transcript-2024-election/.

TrumpadvisorandformerUSTrade

RepresentativeRobertLighthizerindicatedthatthetariffwouldbetreatedasanadd-ontoexistingtariffsrather

thananewfloor,meaningthat(forexample)animportedproductcurrentlysubjectto3percenttariffswouldfacea13percentratefollowingtheimpositionoftheuniversalbaselinetariff(seeSavage,SwanandHaberman,“A

NewTaxonImportsandaSplitFromChina:Trump’s2025TradeAgenda”).Additionally,theTrumpcampaign

websitenotesthattheuniversalbaselinetariffwill“increaseincrementally”iftradingpartners“manipulatetheircurrencyorotherwiseengageinunfairtradingpractices,”explicitlymentioningdevaluingcurrencyandsubsidizingdomesticindustryasformsof“tradecheatingandabuse”(see

/agenda47/agenda47-president-trumps-new-trade-plan-to-protect-american-

workers)

.Subsequentlyinthecampaign,Trumpbeganinvokinga20percenttariff(KinseyCrowley,“Railingagainstinflation,Trumpfloats20%tariffthatcouldboostprices,expertssay,”USAToday,August15,2024,

/en-us/money/markets/railing-against-inflation-trump-floats-20-tariff-that-could-boost

-

prices-experts-say/ar-AA1oRpFR?ocid=msedgntp&pc=DCTS&cvid=d9d1d6a5ae5f487f9a37539e86e5dc12&ei=28).11Onthe60percent(ormore)tariffonChina,seeRebeccaPicciotto,"Trumpfloats‘morethan’60%tariffson

Chineseimports,"February4,2024

,/2024/02/04/trump-floats-more-than-60percent-

tariffs-on-chinese-imports.html.

Forconfirmation,seealso“ReadtheFullTranscriptsofDonaldTrump’sInterviewsWithTIME,”

/6972022/donald-trump-transcript-2024-election/.

4

InthecaseoftheuniversalbaselinetariffandtheadditionalChinatariff,Trumpwould

likelyinvokeeithertheInternationalEmergencyEconomicPowersAct(IEEPA)of1977or

Section338oftheTariffActof1930,oreventheTradingWiththeEnemyAct(TWEA)of1917,asthelegalbasisfortheseactions.Suchmoveswouldlikelybechallengedinthecourts,butthecourtshavehistoricallydeferredtotheexecutiveinsuchinstances(Hufbauer2008),thoughnotallscholarsagreethattheSupremeCourtwouldacquiesceintheseparticularcases(Wolff

2024).ThefreetradeagreementswereestablishedthroughCongressionallegislationandthe

impositionoftariffsonthesepartiesthroughexecutiveactionwouldfaceahigherhurdleinthecourts.Alternatively,withasufficientlysupportiveCongress,thesenewtariffscouldbe

establishedvialegislation.

12

Finally,ithasbeenreportedthatformerTrumpadministrationofficialsandalliesare

draftingproposalstotrytoerodetheFed’spoliticalindependencebygivingthepresidentmoreinfluenceovermonetarypolicy.

13

TrumphimselfmusedatanAugust2024pressconference

that“Ifeelthatthepresidentshouldhaveatleast[a]sayinthere,yeah.Ifeelthatstrongly.Ithinkthat,inmycase,Imadealotofmoney.IwasverysuccessfulandIthinkIhaveabetterinstinctthan,inmanycases,peoplethatwouldbeontheFederalReserveorthechairman.”

14

Whilecentralbankindependenceisnotaninternationaleconomicpolicyperse,itcouldresultinsignificantcross-bordermacroeconomicspillovers.Amongtheideascirculatingare

replacingFedChairJeromePowellwithsomeonemorepoliticallypliable,subjectingFed

regulationstoWhiteHousereview,requiringthatthepresidentbeformallyorinformally

consultedoninterestratedecisions,andperhapsmostfancifully,makingthepresidentanex-officiomemberoftheFed’sboardofgovernors.Wilcox(2024)arguesthatintheworstcase,

underthe“unitaryexecutivetheory,”independentagenciessuchastheFedcouldbedeemedunconstitutional,ineffect,grantingthepresidentthepowertosetmonetarypolicy.The

concernisthatthepresidentwouldpresstheFedtosetinterestrateslowerthanotherwisetospurstrongereconomicgrowthdespitethelikelihoodofdrivinginflationhigher.

Inthispaper,weaskthequestion,whatifasecondTrumpadministrationimplementedsomeofthesepolicies?Wefocusonthefollowingscenarios:

•Deportationof1.3millionor8.3millionunauthorizedimmigrantworkers.

•A10percentagepointadditionaltariffonalltradingpartnersanda60

percentagepointadditionaltariffonChina(withandwithoutothercountries

retaliatinginkindbyimposingsteepertariffsonimportsfromtheUnitedStates).

•ErosionofFedindependence.

12Similarly,therevocationofChina’sPNTRstatuswouldrequireCongressionallegislation.

13AndrewRestuccia,NickTimiraos,andAlexLeary,“TrumpAlliesDrawUpPlanstoBluntFed’sIndependence,”

WallStreetJournal,April26,2024

,/economy/central-banking/trump-allies-federal-reserve-

independence-54423c2f?mod=hp_lead_pos1;

GinaChon,“Imprisonedex-TrumpaidePeterNavarropredictsFed

Chair’sousterand‘massdeportations’inasecondpresidentialterm,”Semafor,May21,2024,

/article/05/21/2024/imprisoned-ex-trump-aide-peter-navarro-predicts-ouster-of-fed-

chair-jay-powell.

14AndrewRestuccia,“TrumpSaysPresidentShouldHaveInfluenceonFed'sDecisions,”WallStreetJournal,August9,2024

,/livecoverage/stock-market-today-dow-sp500-nasdaq-live-08-08-2024/card/trump-

says-president-should-have-influence-on-fed-s-decisions-wYiEwqxjp9oG4iFWN4o7.

5

MODELINGTHEPOLICIES

Weexploreeachpolicyindependentlyandthencombinethemtocapturetheoverall

implicationsofTrump'seconomicagenda.TheanalysisisbasedontheG-CubedMulti-Country

ModelofMcKibbinandWilcoxen(1998,2013),whichiswidelyusedincentralbanks,

internationalinstitutions,governmentagencies,andcorporationsforscenarioplanningand

policyevaluation.

15

TheversionoftheG-CubedmodelusedinthispaperisanupdatedversionoftheG20version(McKibbinandTriggs2018).Themodelhas19sovereigneconomiesfrom

theG20blocplusfourregionsandtherestoftheworld.Themodelissummarizedintable1.

TheG-Cubedmodelincludesstandardfeaturesofmodernmacromodels,including

severalthatareworthhighlighting:intertemporalgeneralequilibriumwithoptimizationby

householdsandfirmssubjecttoliquidityconstraints;rigidities,suchaslimitsonthepaceof

investmentatthesectorlevel,thatpreventeconomiesfrommovingquicklyfromone

equilibriumtoanother;pricesofgoodsandservicesineachsectorthatadjusttoclearthe

domesticmarketinlocalcurrencyterms;aneconomywidenominalwagethatisstickyand

adjustsaccordingtoanexpectations-augmentedPhillipscurvedependingonexpectedinflation(asmeasuredbytheUSconsumerpriceindex,orCPI),currentCPIinflation,andeconomywidelabormarketconditions.Thisdeterminestheshort-termsupplyoflaborineachcountry.Firmsineachsectoroperateontheirlabordemandschedule.Heterogeneoushouseholdsandfirms,whereafractionofhouseholdsconsumetheircurrentincomeandafractionoffirmsmake

backward-lookinginvestmentdecisions.Themodelalsocapturescross-bordercapitalandtradeflowsandbilateralcross-borderproductionnetworks.

Notably,themodelincorporatesafull-fledgedexternalsector.Intertemporaldecisionsofhouseholdsandfirmsdeterminebothsavingandinvestmentinresponsetoactualand

anticipatedgovernmentpolicychanges.Thegapbetweenaggregatesavingsandinvestment

determinesthecurrentaccount.Akeyvariableaffectingnationalsaving,investment,and

currentaccountsistherealinterestrate,whichdirectlyaffectssavingandinvestmentdecisionsandhumanwealththroughadiscountingchannel.Thetradebalanceisthecurrentaccount

adjustedbyforeignnetfactorincome.Flexibleexchangerates(exceptforChina,whichhasacrawlingpeg)andopencapitalaccountsareassumedforthe24countriesandregions.

16

Monetaryandfiscalpolicyrulesapplyineachregion/country.Itisimportanttonote

thatthecentralbanksineacheconomyfollowrulesforsettingpolicyinterestratesthatreflectthestandardHenderson-McKibbin-Taylorrules(HendersonandMcKibbin1993,Taylor1993)

withdifferentweightsonoutputgapsandinflationrelativetotargetsineachcountry.FortheFed,weassumestandardTaylorcoefficientswithequalweightsoninflationrelativetotargetsandthegapbetweenoutputgrowthandtargetedoutputgrowth.Insomecountries,suchas

China,thereisalsoaweightonthechangeintheexchangeratetoslowdowntheappreciationordepreciationoftherenminbi.Thisassumptionaboutmonetarypolicyhasthemostimpactontheeconomyintheinitialyearsoftheshockbecauseofthenominalrigiditiesinthemodel.

15Seethefullmodeldocumentationat

/

andparticularly

/.

16Eventhoughmanydevelopingeconomieshavevariousdegreesofcapitalcontrolsandexchangerateinterventionpolicies,thesecountriesaremostlyinaggregateregions,andforsimplicityweuseflexibilityassumptionsforthesecountries.Thisdoesn’thaveamaterialeffectonthemainresults.

6

Monetarypolicy,inthelongrun,onlyaffectstherateofinflationandnottherateofpotentialoutputgrowth.

Themodelissolvedfrom2018to2100,with2018asthebaseyear.Eachcountry's

exogenouseconomicgrowthdriversaresectoralproductivitygrowthandlaborsupplygrowth.Thekeyinputsintothebaselinearetheinitialdynamicsfrom2017to2018andsubsequent

projectionsfrom2018onwardsforpotentiallaborsupplygrowthineachcountryandsectoral

productivity(ortechnological)growthratesbysectorandcountry.Itisassumedthateach

sectorineachcountrycatchesuptothetechnologyfrontiersectorbasedonaBarro(1991)

productivitycatchupmodel.Asemerging-marketeconomieshavelowinitialtechnologylevels

relativetothefrontiersectors,theyenjoyfasttechnologicalprogressand,hence,fasteconomicgrowth.Thisproductivitycatchupalonewillsignificantlychangethelandscapeoftheworld

economythiscentury.Thegrowthinthecapitalstockineachregion'ssectorisdeterminedendogenouslywithinthemodel.

RESULTS

Weusethemodeltoproducebaselineprojectionsforalleconomies—thatis,whatwould

happenifTrumpdoesnotenactthepoliciesexaminedhere?Weassumethe2017taxcuts

enactedinTrump’sfirsttermareextendedorthatsomeequivalentDemocratictaxpackageisenacted:Otherwise,theirscheduledexpirationin2025wouldimposeastrongfiscaldragthatwouldmaketheoverallUSresultsmorenegative.Becauseweassumethetaxcutsare

extendedinboththebaselineandcounterfactualpolicyscenarios,thedecisionhasalmostnoeffectontheresultswhenexpressedasdeviationsfrombaseline.

TheUSbaselineshowsthatonaveragefrom2025to2040thecountryseesannualrealGDPgrowthof1.9percent;annualemploymentgrowth(measuredashoursworked)of1.5

percent;anannualinflationrateof1.9percent;a10-yearnominalinterestrateof5.4percent;anda10-yearrealinterestrateof3.4percent.

Wethenassumetheenactmentofeachpolicyandanalyzetheresultsseparately.Inthefinalsection,weexaminetwoscenarios(“high”and“low”)inwhichacombinationofpoliciesisenacted.Itisimportanttonotethatmostresultsarepresentedasapercentdeviationfromthebaselineofthevariablesindicatedinthefigures.Theexceptionsarechangesininflation,whichareexpressedaspercentagepointdeviations,andinthetradebalance,expressedaspercentofGDPdeviations.

An

onlinedashboard

containsafullsetofmacroeconomicandsectoralresultsforallcountries.

DeportationofUnauthorizedImmigrantsintheUSWorkforce

WeexaminetwomassdeportationscenariosandfindbothcauselowerUSGDPand

employmentthrough2040thanotherwise—meaningrelativetothebaselineprojections,orcomparedwithwhatwouldhavehappenedwithoutthedeportations.USinflationishigherthrough2028,thefouryearsofasecondTrumppresidency.Thescenariosdifferonlybythedegreeofdamageinflictedonpeople,households,firms,andtheoveralleconomy.

7

TocalculatetheshocktoeachUSsector’spotentiallaborsupply,weapplythesector

sharesofemploymentto1.3millionand8.3millionunauthorizedimmigrantsbeingdeported.Inthefirstscenario,inwhichthegovernmentdeports1.3millionunauthorizedimmigrant

workers,thepotentialUSlaborsupplyisreducedby0.8percentbelowthebaselineby2028.Inthesecondscenario,allunauthorizedimmigrantworkers,anestimated8.3millionin2022,aredeported.Thetotalpotentiallaborsupplyfalls5.1percentbelowthebaselineby2028.

Table2containsPewCenterestimatesofthenumberofunauthorizedimmigrantsintheUSeconomyin2017,dividedbetweenthesixsectorsinthemodel.Whilemostunauthorized

immigrantsareemployedintheservicesector,whenmeasuredasashareofasector’slabor

force,theirpresenceislargestinagriculture,followedbymanufacturing.Aswedonothavethenumbersdisaggregatedintotypesofmanufacturing,weassumethatthelaborforcein

manufacturingissplitequallybetweendurableandnondurablemanufacturing.Theshocks

imposedinthemodelar