President-elect Donald Trump victory in the November 5 elections highlights the frustrations of millions of voters, and many Americans are taking notice exit polls Tuesday that they are still suffering from the highest inflation in four decades and are dissatisfied with the country’s economic trajectory.
Trump ran a campaign that promised to tackle these problems and promised to do so end the ‘inflation nightmare’ and to reduce prices “very quickly.” He also offered numerous tax cuts to various groups ranging from seniors Unpleasant homeownersand to finance some of these cuts new import duties from China and other countries and to deport millions of undocumented immigrants.
In the wake of Trump’s victory, economists and policy experts are assessing how these policies could impact the economy and consumers’ wallets. Wall Street is already predicting that his policies could boost business growth. causing the S&P 500 to move higher by as much as 2.2% on Wednesday.
But some experts note that Trump’s plans could also boost inflation, potentially hurting consumers hoping for relief at the checkout.
“The devil is in the details,” Ed Mills, a Washington policy analyst at investment bank Raymond James, told CBS MoneyWatch. “Trump’s agenda on taxes, trade, tariffs and immigration could have significant economic consequences and raise concerns about a second wave of inflation.”
However, compromises or changes to its plans “could soften the impact,” Mills added.
To be fair, it’s uncertain whether Trump can respond to voters’ most pressing economic concerns, especially if the House of Representatives shifts to Democratic control, which could hamper his plans to extend the 2017 tax cuts. Act (TCJA) and to make other changes.
Here are five ways Trump’s policies could impact the economy and your money.
Your money under Trump’s tax plans
The core of Trump’s tax plan is to extend provisions in the TCJA that expire at the end of 2025. These include the law’s reduced tax brackets and the expanded standard deduction.
Trump also wants to make deeper tax cuts for some individuals and companies, with his campaign proposing to lower the corporate tax rate from the current 21% to 15%. He has floated the idea of eliminating personal income taxes on many types of income, from tips to Social Security benefits, but has not yet provided details.
Trump’s combination of tariffs and tax cuts would be the sixth-largest tax cut since 1940, according to a recent Tax Foundation analysis.
If Trump can make these changes to the tax code, income taxes would drop for all income groups. But the biggest beneficiaries would be high-income households, according to an analysis by the Penn Wharton Budget Model (that study assesses Trump’s proposed tax cuts but does not take into account the impact of tariffs.)
That means a middle-class family with an income of about $80,000 a year would get a tax break of about $1,740 in 2026, the analysis found. According to Penn Wharton, top-earning households, with incomes over $14 million, would see their taxes reduced by $376,910.
What could happen to inflation?
Consumers rank inflation as one of their top economic concerns, and many are still feeling the effects of rising prices during the pandemic. Although US inflation has now fallen close to that of the Federal Reserve 2% annual target, many Americans still describe it as high because prices have not fallen; instead, prices are simply rising more slowly than during the pandemic.
Economists have warned that Trump’s plans could reignite inflation. That’s because tariffs are essentially sales taxes paid by American consumers, not the countries that export goods to the US. In addition, Trump’s plan to deport millions of immigrants could also boost inflation, as employers are likely to face higher wages due to a tight labor market. .
“Two key pillars of his policy proposals, tariffs and mass deportations, are likely to cause prices to rise because they will make it harder for companies to produce goods,” Jacob Channel, chief economist at LendingTree, told CBS MoneyWatch.
Trump’s plan to impose a 10% tariff on all imports and 60% or more on Chinese goods shipped to the U.S. could add $1,700 a year in additional costs for the US, according to the nonpartisan Peterson Institute for International Economics an average middle class household. .
According to Andrzej Skiba of RBC Global Asset Management, Trump’s plans could increase inflation by as much as 1 percentage point, bringing it to about 3.4% annually – above the Fed’s target of 2%.
“If you add 1% to the inflation figures next year, we have to say goodbye to interest rate cuts,” Skiba said.
Can the economy grow faster?
The economy could grow slightly faster initially under Trump’s plans to cut corporate taxes, but that impact could fade over time, mainly due to the impact of the deportation of millions of immigrants, according to Oxford Economics.
Real GDP growth could be 0.3 percentage points higher in 2026 than if current economic policies continued, Ryan Sweet, chief U.S. economist at Oxford Economics, wrote in a Nov. 6 research note.
But, he added, GDP growth could ultimately fall to 0.6 percentage points lower than previous projections in 2028 due to the impact of deportations and higher tariffs.
Will housing become more affordable?
Probably not, said Lisa Sturtevant, chief economist at Bright MLS.
First, if Trump’s plans reignite inflation, as some economists predict, the Federal Reserve may not continue cutting rates. Without further cuts in borrowing costs for consumers and businesses, mortgage rates are unlikely to fall, she added.
Second, deporting millions of undocumented immigrants could impact the housing industry — which is already facing a severe housing shortage — because it relies on these workers to build new homes, Sturtevant said.
“His mass deportation proposal would have a chilling effect on the construction sector, shrinking the already cash-strapped workforce and halting much-needed new home construction,” she said. “At the same time, the proposed rates will increase construction costs.”
Will Trump’s policies help your 401(k)?
Possibly, given that Trump’s proposed corporate tax cuts and support for lighter corporate regulations, if implemented, could boost corporate profits and boost the stock market.
On Wednesday, indices such as the S&P 500 and the Dow Jones Industrial Average, rose about the optimism on Wall Street for stronger business growth.
“Lower corporate taxes and/or deregulation of the energy and financial sectors under a Trump administration could provide additional support,” Solita Marcelli, Chief Investment Officer Americas, UBS Global Wealth Management, said in an email.
Other financial instruments could also get a boost, including cryptocurrencies, due to Trump’s promise to make the US the “crypto capital of the planet.”
At the same time, many of these predictions depend on Trump making changes to tax, regulatory and other laws, Channel noted.
“Virtually all of these policies will be difficult to implement, even with Republican control of the House of Representatives, the Senate and the presidency,” he said. “With that in mind, we may not see much change in the broader economy at all.”
He added: “Inaction from the next Trump administration could mean the economy continues on its current trajectory.”
