As President-elect Donald Trump prepares to overhaul the US economy, analysts warn that many of his policies may hurt the economy more than help it. Will he be able to deliver on his ambitious promises and ignite an economic boom?
Has Trump Promised Too Much on the US Economy?
The world’s largest economy has been promised a comprehensive overhaul by President-elect Donald Trump. His agenda includes an “end to the devastating inflation crisis,” tariffs, and big cuts to taxes, regulation, and government size. This combination is expected to ignite an economic boom and revive faith in the American dream.
Trump’s promises are ambitious, but analysts warn that many of his policies may hurt the economy more than help it. As he prepares to set his plans in motion, Trump will face political and economic realities that may make it difficult to deliver on all his promises.
Tackling Inflation: A Risky Pledge
Trump has repeatedly promised to lower prices, but this pledge is risky given that prices rarely fall unless there is an economic crisis. Inflation, which measures the rate of price increases, has already decreased significantly, but remains a challenge to eliminate completely. Trump’s claim to expand US oil and gas production to reduce energy costs may not be enough to combat inflation, as many forces affecting it are outside presidential control.
Analysts warn that many of Trump’s ideas, including tax cuts, tariffs, and migrant deportations, may make the problem worse. Economist John Cochrane of the Hoover Institution notes that there is tension between Trump’s pro-business and nationalist camps, making it difficult to achieve their goals simultaneously.
Imposing Blanket Tariffs: A High-Stakes Gamble
Trump’s most unorthodox economic promise was his vow to impose tariffs of at least 10% on all goods coming into the US, rising to over 60% for products from China. While some of Trump’s advisers suggest that tariffs are negotiating tools, analysts warn that they may lead to higher prices and pain for companies hit by foreign retaliation.
The policy debate alone is generating uncertainty that could depress investment and reduce growth in the US by as much as 0.6% by mid-2025, according to Oxford Economics. Trade lawyer Everett Eissenstat expects an across-the-board tariff but acknowledges that it will compete with other goals.
Lower Taxes, Cutting Spending: A Complex Task
Trump’s growth plan includes lower taxes, less regulation, and a smaller government, which he says will unleash American business. However, analysts say cutting regulation may take longer than expected, and Trump is likely to prioritize extending expiring tax cuts over cutting spending.
Ms Boccia of the Cato Institute expects borrowing to surge under the Trump administration, adding to inflation pressures. Financial markets have already driven up interest rates on government debt in recent weeks due to these concerns.
What Trump voters want is clear: they want a revival of manufacturing in the US and lower prices. However, as Trump prepares to set his plans in motion, it remains to be seen whether he can deliver on all his promises without causing more harm than good to the economy.
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