Local business owner Kris Kass fears President Donald Trump’s economic policies may negatively impact her businesses.

Kass, part owner of Bread Garden, Joseph’s Steakhouse in Iowa City, and Reunion Brewery in both Iowa City and Coralville, said Trump’s proposed planned tariffs — a tax on imported goods that can be passed onto consumers — could harm business owners. While the tariffs on Mexico and Canada have been delayed at the last minute, the agreement is temporary.

“If we increase tariffs on Mexico, then you’re talking about further issues with produce prices, which directly affects our grocery store and all of our businesses,” Kass said. “There isn’t a restaurant in town that doesn’t order produce of some nature.”

In January, Kass received notice from her distributor that delivery prices will be rising. Though Kass is hesitant to blame Trump’s policies for this as it’s only the beginning of his administration she said it does reflect the volatility of prices in the food market.

Kass said higher produce prices, leading to higher distributor prices, will negatively impact her businesses. She said small local businesses like her own are the most at risk, as they don’t own their distributors like larger companies including Walmart or Target do.

Kass fears these higher prices will make it harder for smaller businesses to compete.

It isn’t just Kass who fears prices could rise under Trump’s administration. Experts, business owners, and farmers fear Trump’s plan for tariffs, among other key economic priorities, could result in the very inflation for which he lambasted former President Joe Biden.

Under Biden, prices rose by 20 percent, becoming a focal point of the Republican party and voters alike.

In an election where voters’ number one concern was economic conditions, Trump’s campaign platform focused on economic policies targeting tariffs, oil production and exports, tax cuts, and mass deportations. Trump has promised these policies will result in steadily decreasing prices and restore economic power to a nation that he has described as, “in serious decline.”

On Trump’s first day in office, he signed   an executive order directing his cabinet officials to use every tool at their disposal to reduce inflation, though the move is largely seen as symbolic.

“I will direct all members of my cabinet to marshal the vast powers at their disposal to defeat what was record inflation and rapidly bring down costs and prices,” Trump said during his inaugural address. “We will bring prices down, fill our strategic reserves up again right to the top, and export American energy all over the world.”

But some experts feel otherwise. University of Iowa economists Hennadige Thenuwara and Anil Kumar said they expect inflation to increase because of Trump’s policies.

Thenuwara, whose research encompasses the role of government and economic systems, said that going into the election, voters were concerned about the high cost of living. Trump’s plan, which he claims will lead to steadily decreasing prices, appealed to these concerned consumers.

“He appealed to the suffering of the masses,” Thenuwara said.

Now, though, neither Thenuwara nor Kumar believe Trump’s plans will relieve consumers from financial stress but rather think they will ultimately cause inflation.

Kumar said these inflationary policies, particularly tariffs, will ultimately harm consumers, especially those with less spending power.

“Lower income houses will be disproportionately affected because they spend a larger share of their income on consumption,” Kumar said.

Iowa City business owner expresses concern

Kass said in addition to Trump’s trade policies, his tax policies may also impact her business.

She said her concern is that Trump’s tax policies will create a tax system that benefits the wealthy while being disadvantageous to the middle and lower classes. This could result in the middle class losing spending power, impacting her customer base, which includes students from the UI.

“This is one of the largest enrollment classes since COVID. So, that’s always good,” Kass said of the UI, a key driver of Iowa City’s economy. “That means more people in town, more people spending money. But if all of those people, or you know, 85 percent of those people, have to retrench their spending, that affects all of us in the downtown and that’s very concerning.”

Despite these fears, Kass remains hopeful. She said it’s too early to tell what the effects of Trump’s economic policies will be and that her businesses will just have to roll with punches for the time being.

Kass said she hopes the economy allows people and businesses to flourish, and she hopes that Trump’s economic policies don’t get in the way of this goal.

“It’s concerning, and we want everybody to flourish. As a business owner, you’re concerned, but as a human being, you’re also concerned,” Kass said.

Economic experts predict higher inflation

Neither Kumar nor Thenuwara believe Trump’s proposed plans of cutting taxes, imposing tariffs on foreign nations, and enacting mass deportations will help the American consumer.

Kumar explained tariffs work by raising prices on imported goods, which is cause for concern, as the U.S. imports more goods than any other nation. 

Kumar said economic policies like tariffs create winners and losers in the economy with domestic producers and protected industries like steel benefiting and industries reliant on imports like automobile manufacturing being harmed. The greatest loser, Kumar said, will be the consumers.

In addition to harming consumers, Kumar said another risk of tariffs is retaliation from foreign governments, resulting in a trade war where foreign nations respond to the imposition of U.S. tariffs by placing a tariff on goods that the U.S. exports. Kumar said agriculture is particularly vulnerable in these trade wars.

“Generally, these retaliatory tariffs hit U.S. farmers very hard,” Kumar said.

During Trump’s last administration, his tariffs against China — the largest importer of U.S. soybeans — resulted in a trade war that led to lower prices and revenue losses for U.S. farmers.

In response to Trump’s tariff plans, grain futures on the Chicago Board of Trade have already decreased, with corn futures decreasing by 1.5 percent, soybean futures decreasing by 1.1 percent, and lean hog futures decreasing by 0.4 percent.

Beyond tariffs and deportations, Trump plans to extend the Tax Cuts and Jobs Act, which was initially signed into law by Trump in 2017. This is a move that the U.S. Sen. Chuck Grassley, R-Iowa, supports.

In his floor remarks regarding his support of Trump’s Secretary of Treasury nominee on Jan. 27, Grassley spoke in support of the extension of the Tax Cuts and Jobs Act, highlighting what he perceives as a threat to the middle class were it not renewed.

“And we all know in this body, the biggest tax increase in the history of the country can happen to the middle class even without a vote of Congress, because the 2017 tax bill sunsets at the end of this year,” Grassley said.

Kumar, however, said the extension of the 2017 Tax Cuts and Jobs Act is another key pillar of Trump’s economic policy that could be inflationary.

While aspects of the act, such as the child tax credit and simplifying the tax code, have had positive effects, Kumar said the net effect of Trump’s tax cuts is an increase to the federal debt and a loss of government revenue.

Upon the passing of the Tax Cuts and Jobs act, the Joint Committee on Taxation estimated the act would amount to a revenue loss of $1.3 trillion over 10 years.

Kumar said these tax cuts will primarily benefit the wealthy, and the increase in the federal debt will ultimately result in higher inflation. These effects, he said, will worsen income inequality.

“The bottom line is that extending these tax cuts will further deepen income inequality while adding substantial pressure to federal deficits,” Kumar said.

Realistically, Kumar said the most Trump’s economic plans may achieve would be a modest boost to the economy, which Thenuwara notes could also be the result of technological innovation as opposed to government policies.

Kumar said that at least for the beginning of Trump’s term, economic experience will continue to be shaped by Biden- era policies, and it will take time for Trump’s policies to come into effect.

Thenuwara also said it may take time for policies to be felt in the economy but said once policies do come into effect, their impacts will be clear.

“Some of these policies are disruptive,” Thenuwara said. “That might hurt most of the low-income level people. They might lose their jobs. They will have to pay higher prices for goods. Then reality will set in.”

“Drill, Baby, Drill”

Battling high inflation has been a key priority in Trump’s campaign, and in his inaugural speech he pointed to high energy prices as the root cause.

“The inflation crisis was caused by massive overspending and escalating energy prices, and that is why today I will also declare a national energy emergency,” Trump said. “We will drill, baby, drill.”

Richard Priest, an oil and gas historian at UI, said Trump’s “drill, baby, drill” platform may not bring the economic gains it has promised.

“‘Drill, Baby, Drill’ is a slogan that unifies,” Priest said, “But it’s not an operational policy.”

Priest noted that based on Project 2025, a political blueprint written for a Republican administration that calls for increased conservatism, it can be assumed that Trump’s approach to energy will be reducing government regulatory powers, many of which pertain to the environment. Trump has already left the Paris agreement, and Priest said the president will also lift restrictions on liquified natural gas exports.

The Department of Energy released a report in December on the impact of increased natural gas exports. The report found that increasing natural gas exports may lead to a triple-cost increase to American consumers. It claimed that increasing natural gas exports will lead to an increased domestic price of natural gas, increasing electricity prices, and harming consumers.

Priest cited this report as evidence of the flaws in Trump’s energy plan, which may be inflationary.

“A lot of it is just bluster and political signaling to the MAGA world that we’re not going to be pushed around by environmentalists and environmental regulations with the promise that energy is going to be abundantly cheap for everybody,” Priest said. “But it’s not really a coherent policy.”

Another flaw of “Drill, Baby, Drill,” according to Priest, is the oil. As far as oil production goes, Priest doesn’t see this as an area for massive growth. Even if the U.S. were to increase drilling, he doesn’t expect it to be able to produce much more as Trump has promised.

“Just because we drill and start to produce a new field doesn’t mean our overall production is going to go up. A lot of new production is replacing declines in old fields,” Priest said.

Aside from domestic production, Trump has sought to place tariffs on foreign oil. On February 1st, Trump announced that Canada, by far the largest exporter of oil to the United States, will face a 10 percent tariff on oil.

Even if oil prices, which Priest emphasized are already relatively cheap, were to decrease, Priest said that these prices will ultimately rise again anyway, as global investments won’t match global demand.

“Declining oil prices are highly unlikely in the near term at least,” Priest said, “Trump is not going to be able to increase domestic supply as he has promised.”

Iowa Farmers Union president fears Trump’s economy plans

Aaron Lehman, a fifth-generation farmer in Polk County and president of the Iowa Farmers Union, said Iowa farmers are bracing for their farm income and farm profitability to deteriorate in the wake of Trump’s economic policies.

One of the most pressing concerns Lehman has is the impact of a trade war on farmers, whom he said were victims of retaliatory tariffs during the last Trump administration’s tariff policies against trading policies.

Lehman said though export-heavy farmers are the most vulnerable to these retaliatory tariffs, all farmers are vulnerable, as they have to import at least some of their input costs like fertilizer, equipment, and seed.

“If these inputs are imported from other countries, that tends to raise the price of the products that we have to buy to grow our crops and to grow our lifestyle,” Lehman said.

Brooke Rollins, Trump’s nominee for head of the Department of Agriculture, said at her confirmation hearing on Jan. 23 that the USDA is prepared to provide financial aid to farmers who may be hurt by a trade war.

While Lehman agrees this would be necessary, he said that this kind of government support hasn’t managed to be sufficient in the past.

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“The last time tariffs came into effect, farmers experienced lower prices for what we sold,” Lehman said. “We were experiencing extreme financial losses, and the trade compensation payments unfortunately did not make farmers whole.”

Another policy that risks harm to the agricultural industry is Trump’s plan to enact the largest deportation of immigrants lacking permanent legal status in U.S. history. Immigrants lacking permanent legal status make up around five percent of the U.S. labor force but are almost 50 percent of the agricultural labor force.

Thenuwara said he doubts Trump’s policy of mass deportation will be achieved to the extent that he claims.

However, he said if Trump were hypothetically successful in his deportation plan, it would have serious economic repercussions, notably in the agricultural and meatpacking industries.

“If that happens, then they’ll hurt most of the low-end agricultural products and meatpacking. We’ll produce at a much higher cost, which will increase the cost of living,” Thenuwara said.

Thenuwara said the increased cost of producing agricultural products resulting from deportations would increase the need for importing goods, which raises concerns about tariffs.

“If we don’t produce it here, whatever is coming from Mexico will have even higher prices due to tariffs, so we’ll be hit twice,” Thenuwara said.

Lehman said while he understands the need for immigration reform, the disruption mass deportations would cause in the agricultural labor force would raise production costs for farmers.

Lehman said this will not only make it more difficult for family-sized farmers to survive, but it will ultimately lead to higher food prices and may result in a less secure food system.

“Food will be less safe unless we can have a reliable labor situation,” Lehman said.

Lehman fears the damage Trump’s economic policies will do to the farming industry will place rural Iowan communities at risk of economic devastation.

He noted that on Jan. 15, Iowa-based agricultural manufacturer Kinze announced layoffs, shortly followed by one of Iowa’s largest farming cooperatives, Landus, announcing layoffs on Jan. 17. These layoffs follow the John Deere layoffs in August.

Lehman said these layoffs are a sign of how reduced farm profitability resulting from Trump’s economic plans have a domino effect in Iowa’s economy and harm communities.

Speaking to this lost farm income, Lehman said, “It’s going to impact not just the farm, but it’s going to impact the businesses on Main Street. It’s going to impact our churches in our rural communities. It’ll impact our school districts. All of our community institutions will feel the impact when farm income drops.”