Following Donald Trump’s recent election victory, economists are assessing the potential impacts of his policies on the US economy and personal finances.
Trump’s campaign pledged to end inflation and reduce costs for American households, and his proposals include tax cuts, tariffs on imports, and a stricter immigration policy. While these initiatives could lead to economic growth in some areas, they may also drive inflation upward, adding to consumers’ expenses.
Here are five key ways Trump’s next presidency could impact the economy and Americans’ financial well-being:
1. Lower Taxes for Individuals and Corporations
Trump’s tax plan includes extending the 2017 Tax Cuts and Jobs Act provisions, which reduced tax brackets and expanded the standard deduction. His campaign also proposed further cuts, such as lowering the corporate tax rate from 21% to 15%, which could boost investment and job creation. However, high-income households would benefit most, with middle-income households seeing smaller tax breaks.
Potential impact: Middle-class families could see savings of about $1,700 per year, while high-earners could save hundreds of thousands, according to analysis by the Penn Wharton Budget Model. These cuts could stimulate spending and support economic growth but might lead to increased public debt if not offset by spending cuts.
2. Impact on Inflation and Interest Rates
Trump’s plans to impose tariffs—up to 60% on Chinese imports and 10% on imports from other countries—could drive inflation. These tariffs would likely be passed on to consumers as higher prices, especially in sectors such as consumer goods and electronics. Additionally, stricter immigration policies, including mass deportations, could lead to labor shortages and wage increases, further driving up costs.
Potential impact: Economists estimate that tariffs could add up to $1,700 in annual costs for a typical middle-class household. Inflation may rise by up to 1%, potentially limiting the Federal Reserve’s ability to cut interest rates as planned.
3. Economic Growth Potential
Trump’s policies, including corporate tax cuts and deregulation, could stimulate economic growth initially. However, the effects may be temporary and may taper off due to tariffs and a reduced labor force resulting from tighter immigration policies.
Potential impact: Real GDP could see a slight boost in 2026, though growth might slow by 2028 due to potential constraints in the labor market and higher business costs from tariffs. The net effect would depend on the speed and scale of his policies’ implementation.
4. Housing Affordability Concerns
Rising inflation could hinder the Federal Reserve’s rate cuts, meaning mortgage rates may stay high, affecting home affordability. Moreover, deporting millions of undocumented immigrants, who contribute significantly to construction labor, could further limit housing supply and drive up prices in an already constrained market.
Potential impact: Without additional rate cuts, mortgage rates may stay elevated, making it harder for first-time buyers to afford homes. The lack of labor could slow home-building projects, leading to further price hikes in the housing market.
5. Stock Market and Retirement Accounts
With proposed corporate tax cuts and deregulation, markets are optimistic about the potential for corporate growth, which could benefit retirement portfolios and investments. Since Trump’s victory, indices like the S&P 500 and Dow Jones have risen, indicating investor confidence in stronger corporate profits under his administration.
Potential impact: If corporate tax cuts are enacted, stock market growth could benefit 401(k)s and other investment portfolios. Trump’s administration has also pledged to foster growth in alternative assets, like cryptocurrencies, by reducing regulatory restrictions, which may open new opportunities for investors.
While Trump’s policies have the potential to boost certain sectors of the economy, they also bring risks of increased inflation and potential challenges in Congress, which could affect his ability to implement them fully. Many of his initiatives could face pushback from lawmakers or require significant compromises.
CBS News, the New York Times, and Business Insider contributed to this report.
