Harvard Kennedy School and College Professor Jason Furman ’92 discussed the future of the American economy under President-elect Trump’s second term at a panel this Monday.
The event was organized by the Charles River Economics Labs (CREL), a team of undergraduate pro-bono researchers. CREL co-presidents Julien Berman ’26 and Abhay Duggirala ’26 asked Furman questions about Trump’s policy plans, particularly regarding tariffs and immigration. Throughout the talk, Furman drew on his experience as an economics professor and former chair of the Council of Economic Advisors under President Barack Obama.
Furman began by sharing what he described as his “metatheory about Trump,” which segments Trump’s proposed economic policies into three categories. The first category included policies that the stock market is sensitive to and responds to quickly, such as tariffs.
“Most of what we’re going to talk about would be in that bucket there,” Furman said. “My base case is that he will not do things that dramatically upset the stock market, and so for something like tariffs, he’ll pull back quite a lot on it.”
However, Furman still expressed concern about what Trump’s proposed 25% tariffs on imports with an additional 10% on China would mean for the economy, pointing to two main consequences.
“Number one, you get less imports. That’s obvious. The price of things goes up, obviously you buy less of them,” Furman explained.
“The second is, you get less exports. There’s two ways to think about that. One is the tariffs decrease the demand for foreign currency. That lowers the price of foreign currency, that raises the price of your currency. That’s an appreciation of the dollar. And when the dollar appreciates, it’s harder to do exports.”
With this in mind, Furman proposed an alternate explanation for fewer exports using the example of the clothing industry. Under Trump’s proposed tariffs, clothing imports would decrease due to increased prices. Domestic production of clothing would have to increase to meet American consumers’ demands—this would require some manufacturers to switch from producing goods for export to producing goods for import.
The second category includes mainstream policies that the stock market is not sensitive to. “There’s a bucket of things that the stock market doesn’t care much about or might even like,” Furman said. “Typical Republican deregulation, less emphasis on regulations for climate change, a smaller budget for what’s called non-defense discretionary spending, mainstream Republican positions—I would expect all of that to happen.”
The third category of policies hold little bearing on the stock market and are not mainstream, such as the nominations of Matt Gaetz (who later withdrew) and Kash Patel to direct the Justice Department and FBI, respectively.
Furman then returned to his discussion of tariffs and how he expects Trump to act in the coming months. Furman speculated that Trump’s propositions may be mere negotiating tactics and are unlikely to be enacted once he is sworn in.
“Now, when it comes to tariffs, there’s two different models,” Furman said. “One is he’s just in a negotiating position, and you can act like a crazy person and win in negotiations, and you’ve already seen Justin Trudeau fly from Canada to meet him at Mar-a-Lago, and he’s a brilliant negotiator, and we’re not going to actually have all of this and the world will be fine.”
The other model was not so optimistic.
“A second possibility, though, is that he had industrially looking at tariffs, and this is what gives me pause, and why I’m not certain the stock market is restraining him in the brilliant negotiator model when he says that other countries pay for the tariffs and Americans don’t, I think he believes that when he thinks the world is zero-sum,” Furman said. “And so on tariffs, you have this conflict between a deep-seated belief and a pragmatism stock market negotiation. I think the pragmatism stock market negotiation, for the most part, wins out, but 20-25% chance I’m wrong. And even in that scenario, I think we end up with tariffs above what I personally would have done, including pretty substantial tariffs on China.”
Furman pointed out that about half of U.S. imports consist of intermediate goods, which means that price increases will ultimately be passed on to consumers through higher costs for final goods.
Furman also discussed Trump’s immigration policy and the economic impact it will have. Furman acknowledged that immigration has “been a big part of economic growth in the last couple of years.” Regarding the impact of the Trump campaign’s “mass deportation plan,” he answered, “I think removing eight million people would—separate from my moral views on it, which are very, very strong—would trigger the stock market issue.” Furman argues that taking eight million members of the U.S. workforce out of the U.S. economy would have big issues on Wall Street—an area which Trump often tries to cater his economic planning to support.
Despite Trump making repeated claims of mass deportations with him as president, this is unlikely to happen. Furman mentioned that Trump does not want to make a decision that will negatively impact the stock market. Removing that amount of people would have adverse economic effects, leading Furman to conclude, “I don’t think that would happen.” Instead, in Furman’s perspective, there would be deportation targeting people with “criminal convictions,” which, although it is a broad term, generally means deporting illegal immigrants with a criminal record. These immigration policies could still have economic impacts on the broader U.S., but in Furman’s opinion, “not at the scale” to impact the stock market.
Understanding what industries will be affected by a potential deportation plan is “tricky” because “immigrants build houses, but immigrants also need houses.” In other words, immigrants grow the economy by helping build (supply) homes, but they also drive prices because they drive up demand for homes. Though challenging, Furman specifically pointed out the primary industries impacted by these immigration policies: housing, farming, construction, leisure, hospitality, restaurants, and retail.
Although Furman doubted much of Trump’s economic and immigration plans, Furman was optimistic about Trump’s promise to offer green cards to “foreign” students. “The future of AI in the United States versus China depends a lot on which direction he chooses to go with something like that.” Furman believes that offering green cards to more immigrants with STEM degrees could have a big impact on domestic AI development by providing the labor force with an additional stream of skilled workers.
By the end of the talk, Professor Furman called for more comprehensive economic analysis—from both Democrats and Republicans.
“I have been quite disappointed, frankly, with the Biden administration, which I think has not done and released good analysis on a number of things they’ve done. And I could do chapter and verse if you wanted,” Furman said. “I think the first Trump administration, and the Trump campaign, were not very good either.” Furman is critical of both parties’ history with economic analysis, and hopes for improvement upon it in the future.
Jonah Karafiol ’26 (jonahkarafiol@college.harvard.edu) and Kalvin Frank ’28 (kfrank@college.harvard.edu) embrace free trade.