Can Trump reduce the cost of living? His policies may drive prices up, Mark Zandi says.

President Donald Trump won reelection primarily because Americans were frustrated with the higher cost of living under President Joe Biden. Under Biden’s watch, prices for essential items like groceries, housing, and a gallon of regular unleaded gasoline jumped, and overall prices increased by more than 20%.

Voters seemed not to care about the reasons behind the price hikes or that inflation has subsequently moderated. What mattered to them was how much harder it was to make ends meet.

So, it is unsurprising that in his first few days in office, Trump has focused on explaining how his economic policies will bring down living costs for Americans. Color me skeptical. His policies aren’t just unlikely to reduce living costs, but depending on how aggressively he pursues them, they may make things more expensive.

Levied broadly across countries and products, tariffs will result in higher prices on imported goods ranging from clothing to vehicles. This is the lesson from the tariffs Trump mainly imposed on China in his first term. The overwhelming evidence is that those tariffs were almost entirely passed through to U.S. consumers in higher prices.

This time, the more broad-based the tariffs, the higher the prices consumers will pay.

Trump has argued that higher tariffs will bring more investment and jobs here. This too runs counter to what we learned from the tariffs imposed in his first term. Given the uncertainty tariffs create — on which countries, which products, and for how long — companies will sit on their hands until the dust settles, if it ever does.

And of course, countries facing U.S. tariffs will retaliate, hitting American farmers and manufacturers hard. Costing U.S. jobs.

Also on the new president’s economic policy agenda are mass deportations of immigrants. He has argued that this will lower the cost of housing, as the homes immigrants live in now will become available, weighing on rents and house prices.

However, immigrants make up nearly one-third of those working in the construction trades, and about half of those immigrant workers are unauthorized. Because of that, deportations also mean many fewer homes will be built. It is hard to see this resulting in lower housing costs.

Immigrant workers are also critical for getting food from farms to American store shelves. About one-fifth of agricultural workers are immigrants. Replacing them won’t be easy and will certainly be costly. If anything, grocery prices will go further up, not down.

The president also wants to lower energy costs by getting global oil producers to pump more. Remember his “drill baby drill” mantra during the campaign?

But oil prices are determined in a global marketplace over which he has little control. If, say, Saudi Arabia pumps more oil, pushing down prices, this will incent U.S. frackers, who are far and away the globe’s biggest oil producers, to pump less. They won’t get the return on their investment to make it financially worthwhile.

Natural gas prices, which are critical to the cost of electricity and heating our homes, are also on the rise. The wintry weather has something to do with this, but so do the president’s efforts to facilitate the export of more liquefied natural gas. Because LNG producers can get much higher prices in Europe and Asia, more U.S. natural gas will go to these places, pushing up the price here.

President Trump wants interest rates to come down to ease borrowing costs and has exhorted the Federal Reserve to cut rates. Fed officials set interest rates based on their independent assessment of whether rates are consistent with the central bank’s legislated goals of full employment and low and stable inflation.

It would be counterproductive for the Fed to do otherwise. Lowering rates even more aggressively — simply because the president asked — would only stoke inflation.

Interest rates, like those for mortgages and auto loans, would rise. The Fed does not directly control these, and in fact they are determined by global investors. Fixed mortgage rates have risen sharply recently, partly because investors fear the Fed’s independence from the president’s wishes is threatened.

Some policy steps the president wants to take could help with the cost of living. But multiple factors would have to align.

He has proposed cutting corporate tax rates. All else equal, if businesses pay less in taxes, they may pass some of the benefits on to consumers. Of course, all else is not equal, so the question becomes how the tax cuts will be paid for, or not, which would add to the nation’s large budget deficits. Either way, the net impact on the cost of living is unclear.

Easing regulations on businesses, which the president often talks about, could also lower living costs. But this is marginal at best, since most of the regulatory changes being discussed narrowly impact specific industries or even specific companies. Moreover, most regulatory changes take a long time to implement, partly because most are challenged in the courts.

Of course, I could be wrong, and the president’s policies will lower Americans’ living costs meaningfully. If not, the president showed in his first term that when things aren’t going his way, hurting the stock market and economy, he will pivot on his policies. Fingers crossed that one or the other is the case this go-around.