The economy was the top issue for voters in the 2024 presidential election with many Americans feeling the pinch of higher gas and food prices. From foreign conflict in the Middle East to port workers striking for collective bargaining efforts, as well as voters approving minimum wage raises in several states, the U.S. economy continues to lead in many headlines.

Now, with a new presidential administration coming into office, economists are predicting the future of the economy and how President-elect Donald Trump’s policies could affect it, including the tariffs he has promised to impose on goods from other countries on his first day.

Economists and experts at Michigan State University are available to comment on the economic forecast for the coming year, speaking specifically to the potential implications of tariffs, the stock market, automotive issues and electric vehicles, food prices and agriculture, and education.

Impact of tariffs, stock market and the Federal Reserve

Jason Miller is the interim chairperson of the Department of Supply Chain Management and the Eli Broad Professor in Supply Chain Management in the Broad College of Business. He can comment on various supply chain issues and how tariffs could impact manufacturing jobs and companies.
Contact: mill2831@broad.msu.edu

“There is strong reason to expect importers will pull forward goods, especially from China, to avoid proposed broad-based tariff increases. As there is no evidence that the tariffs introduced in 2018-2019 increased manufacturing employment in protected industries and, in fact, ultimately cost jobs through higher input prices and retaliatory tariffs, Americans should not expect sweeping tariffs will spur the creation of manufacturing jobs, especially those lost 20 years ago due to offshoring. Rather, we know Americans will pay more for goods if these tariffs are implemented, with the most negatively affected firms being the largest, most productive, highest wage-paying companies that currently have manufacturing operations in the USA as well as other countries.”

Andrew Simonov is the Frederick S. Addy Distinguished Chair in Finance and professor in the Department of Finance in the Broad College of Business. He is an expert in U.S. and international stock markets, individual investors, investment banking and behavioral finance. He can comment on how tariffs and potential regulations could affect the stock market.
Contact: simonov@broad.msu.edu

“There are many crucial sides to this equation. First is economic confidence. Before the election, it was negative overall. However, while 60% of Democrats had somewhat positive future outlooks,  more than 90% of Republicans had a negative outlook. Based on 2016 and 2020 data, I expect that those numbers reverse soon, if not already (60% of Democrats have a negative outlook, while 80%-90% of Republicans have a positive outlook). This is a huge driver for the stock market, and I expect that economic sentiment will be a massive driver for the rest of 2024 and 2025.

“Three other drivers are most important for the U.S. public: regulations, Trump tariffs and inflation. Effective January, the administration will seriously pursue rolling back the Biden-era regulations. Stock markets will look upon those rollbacks as positive. Trump tariffs, if implemented, will not significantly affect the stock market or the balance of trade. What we know is that tariffs are always overpromised and underdelivered. However, I hope the Trump administration will use those as a tool to exert concessions on the part of major U.S. trading partners. That can be a positive development in the short- to medium-term. Finally, I do not expect that Trump’s policy will help to fix inflation. As in Biden’s case, the economic policy overall will remain inflationary. The nominal interest rates will be stubbornly high, but real rates (nominal rates minus inflation) can decrease somewhat. Overall, inflation will not affect the stock market significantly.”

Antonio Doblas Madridis an associate professor in the Department of Economics in the College of Social Science. He is an expert in macro and international economics. He can comment on the impact of tariffs and potential trade wars with other countries, as well as what could happen with the Federal Reserve.
Contact: doblasma@msu.edu

“Economic protectionism was already a central issue in 2016, and the first Trump administration did levy tariffs between 10% and 25% on products coming from China and the European Union and replaced NAFTA with the in-the-end-not-so-different U.S.-Mexico-Canada agreement. These measures changed the course of the trade relationship with China, especially since the Biden administration kept many of the tariffs on China. But there was no abrupt change in macro trends. Prices rose modestly, with inflation remaining below 3%, GDP growth rates and the trade deficit were virtually unchanged compared to the preceding years, and the unemployment rate continued its downward trend.

“Now the rhetoric on tariffs and economic nationalism has escalated, and it seems clear that there will be more steps in that direction, hiking tariffs on more products, from more countries, and at higher rates. Will tariffs really rise to 60% on goods from China and 25% from Canada and Mexico? On what products? Will trading partners retaliate? Will supply chains have to be reorganized? As in the first Trump presidency, we will probably have to wait for bilateral negotiations to see if tariffs do rise to a level high enough for consumers to feel it, for the trade deficit to substantially fall, and for any spillovers that may result from the reconfiguration of supply chains.

“Uncertainty is perhaps highest in fiscal policy, where there has been talk on the one hand of eliminating the federal income tax, which would increase the budget deficit to record levels, to on the other hand sweeping austerity programs favored by Elon Musk, which would be a major force in the opposite direction.

“Finally, regarding monetary policy, Trump has been less accepting of Federal Reserve independence, openly challenging its decisions. This has opened the question of whether the Fed will be able to resist pressure from the Executive, and potentially the Legislative branches. The consensus among economists in this area is that more independent central banks are more hawkish — that is, more willing to raise interest rates to fight inflation. A less independent Fed would be likely to loosen policy, lowering interest rates seeking economic stimulus in the short-run, at the risk of higher inflation in the future.”

Automotive and electric vehicle forecast

Amy Broglin is an adjunct faculty member in the Department of Supply Chain Management in the Broad College of Business. She is an expert in international logistics and transportation, warehousing and distribution, and purchasing and sourcing. She can comment on what issues automotive suppliers and makers will have to confront and what could happen to EV mandates.
Contact: broglina@msu.edu

“Automakers have been struggling under the weight of a political agenda intent on pursuing a quick and wide migration to electric vehicles, forcing an unnatural and heavily divergent dual-path strategy as it relates to the continued production of legacy ICE, or internal combustion engine, vehicles, alongside the scale-up and launch of a full lineup of electric vehicles. The difficulty for automakers lies within consumer demand versus political angling — a majority of customers still seeks ICE vehicles and, quite frankly, ICE vehicles continue to underwrite the finances for most legacy automakers, including European and Asian legacy brands, and will for some time, given the intense capital, talent and resource necessary to completely retrofit and/or convert a vast network of suppliers, production facilities, dealerships and distribution channels for an entirely different product class.

“The new administration will likely provide some relief, as looming deadlines for various pieces of EV mandates will either be delayed or rolled back, allowing legacy automakers to refocus on profitability and building out the right infrastructure to support both a more fiscally sustainable path forward, as well as to allow for expanded innovation beyond the EV lens . . . in other words, providing more time for automotive companies to develop various iterations of a powertrain that is more environmentally friendly, but perhaps beyond the somewhat reckless restriction of a purely electric power source. 

“I would expect to see a return to more hybrid models with increasing levels of fuel efficiency as automakers continue to research and develop new formulations of alternative fuels, hydrogen fuel-cell technology and other innovative technologies. Original equipment manufacturers, or OEMs, understand a new shift in direction may still only be temporary, and thus, a commitment to pursuit of more sustainable mobility solutions certainly will remain a priority; however, a new administration will provide a much-needed buffer zone for the market to advance. In the meantime, if left unchecked, a convergence of low-quality Chinese EVs is all but inevitable, which will send immediate and irreversible shock waves throughout global supply chains and hit the U.S. and North American production base especially hard. There is data to support both sides of the tariff debate, but it is clear that steps must be taken to keep the majority of Chinese electric vehicles out of the U.S. market.”

Stanley Lim is an assistant professor of supply chain management who studies consumer behavior, retail strategy and logistics, with an emphasis on last-mile supply chains. He can comment on what the future could hold for electronic vehicles, or EVs, including production and infrastructure issues.
Contact: slim@msu.edu

“A focus on traditional energy sources and relaxed fossil fuel regulations could hinder the adoption of electric vehicles, or EVs, in trucking and parcel delivery — that many retail and logistics companies view as key to future cost savings and emissions reductions. For retailers, trucking supports first- and middle-mile operations and inventory replenishments for their brick-and-mortar stores. Delays in EV adoption could slow the shift toward cleaner transportation solutions and would particularly impact urban areas, where EVs are effective for short-range, high-frequency deliveries. Moreover, if infrastructure investments prioritize highway expansions over the development of urban EV charging networks, retail companies may face constraints in meeting rising e-commerce demands sustainably, reinforcing reliance on conventional trucks and vans.”

Future of inflation, GDP and food prices

Antonio Doblas Madridis an associate professor in the Department of Economics in the College of Social Science. He is an expert in macro and international economics. He can comment on general economic matters, including GDP, unemployment and inflation issues.
Contact: doblasma@msu.edu

“Macro forecasts typically project current trends into the future and tend not to deviate far from recent data. Thus, it is not surprising that, according to the Philadelphia Fed’s Survey of Professional Forecasters, in 2025 GDP growth is expected slightly above 2%, unemployment to remain stable between 4% and 4.5%, and inflation to continue inching toward the 2% target, without quite reaching it. At one-year horizons, and in the absence of recessions, the track record of these forecasts is acceptable. Unfortunately, getting inflation under control does not mean returning to pre-pandemic prices. The overall price level is still rising, albeit more slowly than in the last couple of years, and the Federal Reserve’s goal is to keep reducing the rate of increase to about 2%.

“To return to pre-pandemic prices, the economy would have to go through a period of deflation, with falling prices on average across goods and services. However, deflation is something that the Fed (and other central banks around the world) really try to avoid, due to a concern that it may hinder economic growth and employment. Prices of some specific goods and services, such as used cars, have fallen recently after a previous surge, but a general decrease in the price level is neither happening nor expected.”

David Ortega is a professor and the Noel W. Stuckman Chair in Food Economics and Policy at MSU’s College of Agriculture and Natural Resources. He is an expert in the decision-making processes of consumers, producers and agribusinesses to better inform food policies and marketing strategies. He can comment on what may be in store for food prices and the agricultural community.
Contact: dlortega@msu.edu

“While much of the attention has been on food price increases, what really matters to consumers is how far their hard-earned dollars go at the grocery store. The good news is that wages are starting to catch up with food prices. Since January 2020, grocery prices have risen by more than 25%, but by some measures, purchasing power today is about the same as it was before the pandemic. This means that the number of hours a worker needs to put in to afford groceries is roughly equivalent to what it was in early 2020. However, it’s important to understand the delicate balance here. While higher wages are good for workers, they can also contribute to higher food prices, particularly because food production is so labor-intensive. So, while wage growth helps consumers keep up with rising prices, it can also push food prices higher.

“Regarding possible tariffs, many U.S. food producers rely on imported goods like fertilizer, equipment and packaging materials to keep their operations running. When tariffs are placed on these imports, production costs go up, and those costs are passed on to consumers in the form of higher prices. Additionally, we tend to import food products that we are not able to grow domestically — like coffee that grows in warmer climates.

“Tariffs are taxes on imported goods, so rather than easing inflation, they can worsen it. It’s also important to keep in mind that other countries won’t sit back quietly. They will retaliate. During the U.S.-China trade war, retaliatory tariffs cost American farmers over $25 billion in lost exports to China. The U.S. government responded by providing farmers $23 billion in subsidies under the Market Facilitation Program, funded by taxpayers.

“The bottom line here is that tariffs won’t lower food prices. They can make inflation worse and end up costing both producers and consumers more in the long run.”

Read more from Ortega.

Education’s outlook

Scott Imberman is a professor in the Department of Economics in the College of Social Science and the College of Education. He specializes in the economics of education and education policy and studies returns to higher education, charter schools and teacher incentives. He can comment on what the future could hold for charter and private schools, as well as proposals for K-12 education.
Contact: imberman@msu.edu

“While the details about the president-elect’s plans for education are unclear, we can expect some key changes in policy priorities. First, there is likely to be an emphasis on more school choice options, particularly vouchers that allow students to attend private schools at taxpayer expense. Empirical evidence on vouchers has been rather mixed and context specific. Charter schools may be another area of school choice emphasis, which has had considerably more positive impacts than vouchers.

“The administration is also likely to reduce student loan forgiveness and perhaps restrict income-determined repayment plans. Proposals for large-scale spending cuts, if followed through, are likely to hit education spending hard, with the higher education sector suffering the most due to it being much more reliant on Federal education funds than K-12 education. Lower research spending and more restrictions on financial aid will likely test college and university finances.”