Donald Trump’s victory in 2024 US The presidential election is likely to usher in a series of economic changes at home and abroad, affecting everything from foreign trade to the independence of the US central bank.

He will reap the benefits of an economy that is in good shape, with strong growth, low unemployment and inflation that is rapidly approaching the Federal Reserve’s long-term two percent goal after years of higher interest rates.

However, his victory came as voters expressed discontent with the cost of living as a result of a post-pandemic inflation surge that raised consumer prices by more than 20 percent.

While many of the incoming Republican president’s proposals will ultimately live or die in Congress, which controls the purse strings of the world’s largest economy, there is still much he can do to shape economic policy.

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Tariffs and trade

During the election campaign, Trump said he would implement blanket import tariffs of between 10 and 20 percent in a bid to raise revenues, protect domestic industries and bring jobs back to the United States.

He also threatened to impose a 60 percent tariff on Chinese goods, and even imposed a tax of more than 200 percent on cars made in Mexico.

“To me, ‘tariff’ is a very beautiful word,” he said in a recent interview with Fox News. “It’s a word that will make our country rich again.”

Trump “has made no secret of the fact that he is deeply enamored of tariffs as a political tool,” Kimberly Clausing, a non-resident fellow at the Peterson Institute for International Economics (PIIE), told AFP on Tuesday, adding that she thought he would consider imposing tariffs. elevated if elected.

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If enacted, these policies will undoubtedly have a significant impact on U.S. and international trade, diverting the flow of goods and reshaping international economic ties.

But while they may increase some revenue, they will also hit American businesses and consumers hard, according to a recent article by the nonprofit Tax Foundation.

If imposed, Trump’s proposed tariff increases would increase taxes would hit businesses by another $524 billion a year, reduce GDP by at least 0.8 percent and reduce employment by about 700,000 full-time equivalent jobs, the researchers estimated.

“I think it’s a very quick way to shoot the U.S. economy in the foot, if not the leg,” said Clausing, former deputy assistant secretary for Fiscal Analysis at the U.S. Treasury Department during the Biden Administration.

Inflation and the Federal Reserve

In addition to his tariff plans, Trump has also indicated that he would like to “at least” have a say over interest rates – which are currently set by the independent US central bank – and suggested that he would seek to deport millions of undocumented workers.

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PIIE economists recently estimated that the combined effect of Trump’s plans to raise tariffs, mass deportation of undocumented workers, and greater control over Federal Reserve policy would reduce US economic output by 2.8 to 9. .7 percent in real terms at the end of his term in 2028. .

Employment would also be affected, according to the PIIE analysis, and inflation could reignite, peaking at 9.3 percent in 2026 in a worst-case scenario, above the four-decade high it hit in 2022.

Taxes

The nonpartisan Committee for a Responsible Federal Budget (CRFB) estimates that Trump’s economic agenda could increase the national debt by up to $15 trillion over a decade, nearly double what Kamala Harris’ plans would have done in the worst case scenario. of the cases.

A significant portion of the additional costs comes from Trump’s proposals to extend his tax cuts starting in 2017, which are set to expire next year.

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But extending Trump’s tax cuts would depend on support from Congress, where overall control of the House remains uncertain. Democrats have indicated that there are many parts of these plans that they would not want to renew if they take back the House.

Overall, many of Trump’s policies could end up hurting some of the poorest in society, Margot Crandall-Hollick, senior researcher at the Urban-Brookings Tax Policy Center, told AFP.

“I think a Trump presidency would probably provide fairly limited benefits, if any, to low-income people,” he said.

“And if tariffs are added, they will increase the cost of the goods that every day people use, would be clearly negative for most people with low and moderate incomes,” he added.

Source: AFP