President-elect Donald Trump victory in the November 5 election highlighted the frustration of millions of voters, with many Americans taking note exit polls on Tuesday that he was still reeling from the highest inflation in 40 years and dissatisfied with the country’s economic trajectory.
Trump ran on the campaign vowing to solve the problem, promising end the “inflationary nightmare” and to bring prices down “very quickly.” They also offer many tax breaks for various groups, ranging from senior citizens for hostas well as to finance some of these pieces new tariffs on imports from China and other nations and for deporting millions of undocumented immigrants.
In the wake of Trump’s win, economists and policy experts are evaluating how his policies could impact the economy as well as consumers’ wallets. Already, Wall Street predicts that the policy could boost corporate growth, sending the S&P 500 higher by as much as 2.2% there.
But some experts note that Trump’s plan is likely to increase inflation, potentially leaving consumers hoping for relief at the checkout counter.
“The devil will be in the details,” Ed Mills, a Washington policy analyst at investment bank Raymond James, told CBS MoneyWatch. “Trump’s tax, trade, tariff and immigration agenda could have a significant economic impact and raise concerns about a second wave of inflation.”
However, compromises or changes in the plan “could lessen the impact,” Mills added.
Of course, whether Trump can respond to the most important economic issues for voters is uncertain, especially if the House of Representatives shifts to Democratic control, which could block plans to extend the tax cuts implemented in the Tax Cuts & Jobs Act of 2017. (TCJA) as well as to make other changes.
Here are five ways Trump’s policies could hurt the economy and your money.
Your money under Trump’s tax plan
The core of Trump’s tax plan is to extend the provisions in the TCJA that will expire at the end of 2025. It includes the law’s lowered tax brackets and the expanded standard deduction.
Trump also wants to give deeper tax cuts to some individuals and businesses, with his campaign proposing to lower the corporate tax rate to 15% from the current 21%. He floated the idea of eliminating personal income taxes on various types of income, from tips to Social Security benefits, but has yet to provide details.
The combination of Trump’s tariffs and tax cuts, would be the sixth largest tax cut since 1940, according to a new Tax Foundation analysis.
If Trump is able to implement these tax code changes, personal income taxes will decrease for all income groups. But the biggest beneficiaries will be high-income households, according to an analysis from Penn Wharton’s Budget Model (The research evaluated Trump’s proposed tax cuts but did not include the impact of tariffs.)
That means a middle-class family earning about $80,000 a year would see a tax cut of about $1,740 in 2026, the analysis found. The highest-income households, with incomes of more than $14 million, will see a tax cut of $376,910, according to Penn Wharton.
What could happen to inflation?
Consumers ranked inflation as one of their biggest economic concerns, with many still feeling the impact of rising prices during the pandemic. Although the US inflation rate has now fallen close to the Federal Reserve 2% annual target, many Americans still describe it as high because prices have not gone down; However, prices are only rising more slowly than during the pandemic.
Economists have warned that Trump’s plan could spark inflation again. That’s because the tariff means sales taxes paid by American consumers, rather than the countries that export goods to the U.S. In addition, Trump’s plan to deport millions of immigrants can also boost inflation because employers will suffer higher wages due to the labor crisis. .
“The two main pillars of the policy proposal, tariffs and mass deportations, are likely to drive prices up because they will make it harder for businesses to produce goods,” Jacob Channel, chief economist at LendingTree, told CBS MoneyWatch.
Trump’s plan to impose tariffs of 10% on all imports and 60% or more on Chinese goods sent to the US could add $1,700 a year in additional costs to the typical middle-class household, according to the non-partisan Peterson Institute for International Economics. .
Trump’s plan could boost the inflation rate by 1 percentage point, bringing it to an annual rate of about 3.4% – above the Fed’s 2% target – according to Andrzej Skiba of RBC Global Asset Management.
“If you add 1% to next year’s inflation figure, we have to say goodbye to lower rates,” Skiba said.
Can the economy grow faster?
The economy may initially grow slightly faster under Trump’s plan to cut corporate taxes, but the impact could fade over time, mainly due to the impact of deporting millions of immigrants, according to Oxford Economics.
Real GDP growth could be 0.3 percentage points higher in 2026 than if current economic policies continue, wrote Ryan Sweet, chief US economist at Oxford Economics, in a Nov. 6 research note.
However, he added, GDP growth could ultimately fall to 0.6 percentage points lower in 2028 than previously projected due to the impact of deportations and higher tariffs.
Will housing be more affordable?
Probably not, according to Bright MLS chief economist Lisa Sturtevant.
First, if Trump’s plan revives inflation as some economists predict, the Federal Reserve may not continue to lower its benchmark rate. Without lowering the cost of borrowing for consumers and businesses, mortgage rates will not fall, he added.
Second, deporting millions of undocumented immigrants could hurt the housing sector — which is already experiencing a housing shortage — because it relies on those workers to build new homes, Sturtevant said.
“His mass deportation proposal will have a chilling effect on the construction industry, reducing the already limited workforce and halting the construction of new homes,” he said. “At the same time, the proposed rate will increase the cost of building.”
Will Trump’s policies help your 401(k)?
It could, given that Trump’s proposed corporate tax cuts and support for lighter regulations on businesses, if implemented, could boost corporate profits and lift the stock market.
On Wednesday, indices including the S&P 500 and the Dow Jones Industrial Average, above on Wall Street optimism for strong corporate growth.
“Lower corporate taxes and/or deregulation of the energy and financial sectors under the Trump administration could provide additional support,” said Solita Marcelli, head of Americas investments, UBS Global Wealth Management, 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 pushing for changes in the tax code, regulations and other laws, the Channel noted.
“Almost all of these policies will be difficult to implement, even with Republican control of the House, the Senate and the presidency,” he said. “With that in mind, we may not see much change in the broader economy.”
He added, “Inaction from the next Trump administration could mean the economy continues to chug along its current path.”
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