Trump’s Day 1 Orders Target Inflation. Will They Work?

Among President Donald Trump’s volley of executive orders on inauguration day were several targeting the heart of inflation: housing and energy costs.

Trump began his presidency Monday by signing a slew of executive orders, several aimed at taming consumer price increases. He directed his administration to reduce regulations that drive up consumer prices, specifically mentioning housing, energy, and vehicles.

Other orders focused on energy production, halting policies from the Inflation Reduction Act of 2022 which promoted wind and solar power as well as electric vehicles. He also took other steps to promote fossil fuel production, such as opening up federal land to oil drilling.

Housing and transportation costs are important drivers of inflation, and make up half of all household expenditures, according to a recent government survey. So, reducing those costs would have a big impact on standards of living.

Voters Put Trump In Office To Lower Prices. Can He Deliver?

The post-pandemic surge of inflation has fallen since its recent peak in 2022 but continues to run above the Federal Reserve’s target for a 2% annual rate. Voter surveys found that persistent price pressures were a major issue for voters in the election, propelling Trump into office.

If Trump’s energy orders result in increased oil production, it could put downward pressure on fuel costs, said Iordanis Petsas, a professor of economics at the University of Scranton. However, that’s only if Trump’s measures end up having the desired effect, which could depend on the details of the plan that have yet to be finalized.

“How they’re going to be implemented, we still have to see,” Petsas said.

One of Trump’s orders cited historically high home prices, pointing to regulation as an area ripe for cost reductions. The order said regulatory requirements account for 25% of the cost of constructing a new home. While he wasn’t specific, Trump seems to be referring to a 2021 analysis by the National Association of Home Builders based on surveys of builders.

That analysis found that 23.8% of new home construction costs were because of regulations. That same study also noted the regulations pushing up home prices—namely, zoning approval, architectural codes, building codes, and other rules—were mostly made and enforced at the local level, sometimes in response to federal guidelines.

Trump’s predecessor, Joe Biden, also used executive orders to reduce homebuilding regulations and increase the housing supply, targeting local land use regulations. Again, Petsas said, the devil is in the details of how the order is implemented and whether it will ultimately affect prices.

Will Trump’s Executive Actions on Inflation Impact Your Finances?

If these measures do push down inflation, it might not be quick.

“For the average person, how much we spend on groceries and things like that is not going to be affected right away,” Petsas said.

Robert Litan and Peter Shane, researchers at the Brookings Institution think tank, wrote in a commentary that Trump’s efforts at deregulation in his first term didn’t always go smoothly. The duo calculated that the administration only won 22% of its court cases when opponents challenged its regulatory actions. In one example, Trump’s Department of Energy was unable to delay implementing conservation standards for ceiling fans.

“The magnitude of deregulatory impact from his second administration is going to be dampened significantly unless agency lawyers can provide stronger legal support for their clients’ efforts,” Litan wrote.

Should Trump’s deregulation push succeed, other Trump actions could wipe out those gains in terms of inflation. In the same ceremony where he signed those executive orders, Trump said he was considering imposing tariffs on Mexico and Canada starting Feb. 1, setting a new deadline for a policy he had earlier threatened to impose on Day One of his presidency.

Many economists believe tariffs could drive prices higher, as merchants would pass the cost of the tariffs on to consumers. This could possibly negate any progress Trump’s initiatives could make or even add to inflationary pressure.