I was trying to figure out how to reconcile the impact of Trump’s 10%/60% tax on inflation. McKibbin-Hogan-Noland (2024) tracks the impact of this measure (and mass deportations) on inflation using an updated version of the G-Cubed model. By 2025, they estimate that inflation will be 0.6 percent above the baseline. Goldman-Sachs also comes up with the same stated results (although in their case, they only take part of the capital used).
If I add 0.6 ppts to the September 2025 expected income (according to the U.Michigan study), I will get the following picture.
Figure 1: Annual CPI inflation (light blue), UMich survey of consumer expectations (light blue square), UMich expectations and 0.6 ppts (red triangle). Source: BLS via FRED, Michigan, McKibbin-Hogan-Noland (2024), and author’s calculations.
Note that mass deportations of only (!) 1.3 mn Net will lead to inflation of around 0.35 ppts in 2025, 0.55 ppts in 2026. (A net displacement of 8.3 million would result in about 2.25 ppts higher in 2025, and 2025, and 2025, and 2025, and 2025. ppts in 2026.)
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