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Donald Trump promised big changes for the world’s largest economy.
“Ending the devastating inflation crisis,” tariffs, deep cuts in taxes, regulation, and the size of government are all on the agenda.
He says this combination will spark an economic boom and revive flagging confidence in the American dream.
“We are at the beginning of a great, beautiful golden age of business,” he pledged from the podium at Mar-a-Lago earlier this month.
But there are warnings that many of his policies are more likely to hurt the economy than help it.
As he prepares to put his plans into action, analysts say he is about to face political and economic realities that will make it difficult to implement all his promises.
“There is no clear path forward at this time for how to achieve all of these goals because they are inherently contradictory,” said Romina Boccia, director of budget and entitlement policy at the Cato Institute.
Here’s a closer look at his key promises.
What Trump promised:
“Prices will go down,” he repeatedly said.
It was a risky undertaking – prices rarely fall, unless there is an economic crisis.
Inflation, which measures not price levels but the rate at which prices rise, has already declined significantly, while it has proven difficult to eliminate completely.
What complicates the matter:
Trump pinned his claim on promises to expand the United States’ already record oil and gas production and reduce energy costs. But the forces that affect inflation and energy prices are mostly outside the president’s control.
As much as White House policies are making a difference, analysts have warned that many of Trump’s ideas — including tax cuts, tariffs and deportations of immigrants — risk making the problem worse.
Economist John Cochrane of the right-wing Hoover Institution said the big question facing the economy is how Trump will deal with the “tension” between the more traditional pro-business parts of his coalition and “nationalists” who focus on issues like border control. And competition with China.
“It is clear that both camps cannot get what they want,” he said. “That will be the main story and that’s why we don’t know what’s going to happen.”
What Trump voters want:
Inflation promises were a key component of Trump’s victory, but by many measures, such as growth and job creation, the economy overall was not in the dire straits he portrayed during his campaign.
Since his victory, he has tried to lower expectations, warning that it will be “very difficult” to lower prices.
Amanda Sue Mathis, 34, of Michigan, says she believes Trump’s promises are possible but may take some time.
“If anyone can make better deals to make things more affordable for Americans, it’s Donald Trump,” she said. “He literally wrote the book on the art of deal making.”
What Trump promised:
Trump’s most unorthodox economic promise was his pledge to impose tariffs — a border tax — of at least 10% on all goods coming into the United States, which could rise to more than 60% on products coming from China.
Since then, Trump has intensified threats against specific countries, including allies such as Canada, Mexico and Denmark.
Some Trump advisers have suggested that tariffs are negotiating tools for other issues, such as border security, and he will eventually settle on a more targeted or gradual approach.
What complicates the matter:
The controversy raised speculation about how aggressive Trump would be, in light of the potential economic risks.
Analysts say the tariffs are likely to push up prices for Americans and cause affected companies to suffer foreign retaliation.
In contrast to Trump’s first term, any measures will arrive at a sensitive moment, as the long-running US economic expansion appears to be in its final stages.
Even if tougher tariffs are never imposed, the political debate alone is generating uncertainty that could stagnate investment and reduce growth in the United States by up to 0.6% by mid-2025, according to Oxford Economics.
“They have a very limited margin for error,” Michael Cymbalist, head of market and investment strategy at JPMorgan Asset Management, said in a recent podcast. He warned that the desire for comprehensive reform would likely “break something,” although that remains to be seen.
Trade lawyer Everett Eisenstat, who served as a White House economic adviser during Trump’s first term, said he expected a comprehensive tariff, but acknowledged that the plan would compete with other goals.
“There are always tensions. There is never perfection in politics. Obviously one of the reasons I wanted to re-elect him was concerns about inflation,” he said.
“We are in a different world [than the first term] “We have to see how that works,” he said.
What Trump voters want:
Ben Maurer, a lifelong Republican, said he wants Trump to focus on the broader goal of reviving U.S. manufacturing, rather than tariffs per se.
“I feel like this is more of a negotiating tactic than an actual political path,” said the 38-year-old, who lives in Pennsylvania.
“I’m not saying he’s not going to put tariffs on anything — I think he will — but I think it’s going to be more strategic about what he’s going to put in tariffs. I support that and I feel like his judgment is good enough to decide what he’s going to do.” Tariff.”
What Trump promised:
He has put forward a growth plan of lower taxes, less regulation and smaller government, which he says will unleash American business.
What complicates the matter:
But analysts say that reducing regulation may take longer than expected. Trump is widely expected to prioritize extending expiring tax cuts before cutting spending.
Boccia, of the Cato Institute, said she expects borrowing to rise under the Trump administration and the rise to add to inflation pressures.
She noted that in financial markets, these concerns have already helped raise interest rates on government debt in recent weeks.
Although Trump will also face some resistance from those within his party who are concerned about already high US debt, Ms Puccia said extending the tax cuts – which are expected to add more than $4.5 trillion to US debt over the next decade -It seems certain.
By contrast, Trump excluded a large portion of the budget during his campaign when he promised to leave large programs, such as Social Security, untouched.
The so-called Department of Government Efficiency (DOGE) led by Elon Musk and Vivek Ramaswamy has also publicly scaled back its ambitions.
“The signals the market is sending now are being picked up by economists but not actually by Washington,” she said. “In the end, she is politically taking the path of least resistance.”
What Trump voters want:
Maurer said reducing bureaucracy was key to his hopes for the administration.
He added: “Government spending is absolute madness.”
Additional reporting by Anna Vaje
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2025-01-18 02:13:00
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