5 ways Trump’s next presidency could affect the US economy – and your money

President-elect Donald Trump’s victory in the Nov. 5 election highlights the frustrations of millions of voters, how many Americans took note exit polls on Tuesday that they are still suffering from the highest inflation in 40 years and are unhappy with the country’s economic trajectory.

Trump ran on a campaign promising to tackle these problems, and he delivered end the “inflationary nightmare” and to bring prices down “very quickly.” He also offered a myriad of tax breaks to various groups, ranging from senior citizens to home ownersas well as to finance some of the cuts new tariffs on imports from China and other nations and to deport millions of undocumented immigrants.

In the wake of Trump’s victory, economists and political experts are assessing how these policies could affect the economy as well as consumers’ wallets. Already, Wall Street is predicting that his policies could boost corporate growth, sending the S&P 500 higher by as much as 2.2% on Wednesday.

But some experts note that Trump’s plans could also boost inflation, potentially hurting consumers hoping for relief at the checkout.

“The devil will be in the details,” Ed Mills, Washington policy analyst at investment bank Raymond James, told CBS MoneyWatch. “The Trump agenda on taxes, trade, tariffs and immigration could have significant economic consequences and raise concerns about a second wave of inflation.”

But compromises or changes to his plans “could mitigate the impact,” Mills added.

It is certainly not certain whether Trump can respond to voters’ most pressing economic issues, especially if the House of Representatives shifts to Democratic control, which could hinder his plans to extend tax cuts passed in his 2017 Tax Cuts and Jobs. Act (TCJA) as well as to adopt other amendments.

Here are five ways Trump’s policies could affect the economy and your money.

Your money under Trump’s tax plans

The core of Trump’s tax plan is to extend the provisions of the TCJA that are set to expire at the end of 2025. These include the law’s lowered tax brackets and expanded standard deductions.

Trump also wants to provide deeper tax cuts for some individuals and businesses, with his campaign proposing to cut the corporate tax rate to 15% from its current 21%. He has floated the idea of ​​eliminating personal income taxes on many types of income, from tips to Social Security benefits, but has yet to provide specifics.

Trump’s combination of tariffs and tax cuts would be the sixth largest tax cut since 1940, according to a recent tax foundation analysis.

If Trump is able to enact these tax code changes, personal income taxes will fall for all income groups. But the biggest beneficiaries would be high-income households, according to an analysis by the Penn Wharton Budget Model (this study assesses Trump’s proposed tax cuts but does not include the impact of tariffs.)

That means a middle-class family earning about $80,000 a year would get a tax credit of about $1,740 in 2026, the analysis found. Top-earning households, with incomes of more than $14 million, would see their taxes cut by $376,910, according to Penn Wharton.

What can happen to inflation?

Consumers rank inflation as one of their biggest financial worries, with many still feeling the impact of rising prices during the pandemic. Although US inflation has now fallen close to the Federal Reserve 2% annual target, many Americans still describe it as high because prices have not fallen; rather, prices are simply rising more slowly than they did during the pandemic.

Economists have warned that Trump’s plans could fuel inflation. That’s because tariffs are essentially sales taxes paid by American consumers, rather than the countries that export goods to the United States. On top of that, Trump’s plan to deport millions of immigrants could also boost inflation as employers are likely to face higher wages due to the labor crisis.

“Two main pillars of his policy proposal, tariffs and mass deportations, are likely to drive up prices because they will make it harder for businesses to produce goods,” Jacob Channel, chief economist at LendingTree, told CBS MoneyWatch.

Trump’s plan to levy a 10% tariff on all imports and 60% or more on Chinese goods sent to the U.S. could add $1,700 a year in extra costs to a typical middle-class household, according to the Peterson Institute for International Economics. .

Trump’s plans could increase the inflation rate by as much as 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 should say goodbye to rate cuts,” Skiba said.

Could the economy grow faster?

The economy may initially grow slightly faster under Trump’s plans to cut corporate taxes, but that effect may fade over time, particularly 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 continued, Ryan Sweet, chief U.S. economist at Oxford Economics, wrote in a Nov. 6 research note.

But he added that GDP growth could ultimately fall to 0.6 percentage points lower in 2028 than earlier projections due to the impact of deportations and higher tariffs.

Is housing becoming more affordable?

Probably not, according to Bright MLS Chief Economist Lisa Sturtevant.

First, if Trump’s plans reignite inflation, as some economists predict, the Federal Reserve may not continue to cut its benchmark interest rate. Without further cuts in borrowing costs for consumers and businesses, mortgage rates are unlikely to fall, she added.

Second, deporting millions of undocumented immigrants could affect the housing sector — which already faces a severe housing shortage — because it relies on those workers to build new homes, Sturtevant said.

“His proposal for mass deportations would have a chilling effect on the construction industry, shrink the already limited workforce and halt much-needed new housing,” she said. “At the same time, proposed rates will increase construction costs.”

Will Trump’s Policies Help Your 401(k)?

Possibly, given that Trump’s proposed corporate tax cuts and support for easier corporate regulations, if enacted, could boost corporate profits and lift the stock market.

On Wednesday, indexes including the S&P 500 and the Dow Jones Industrial Average, skyrocketed on Wall Street optimism for stronger corporate growth.

“Lower corporate taxes and/or deregulation of the energy and financial sectors under a Trump administration could provide additional support,” Solita Marcelli, head of investment Americas, UBS Global Wealth Management, said in an email.

Other financial instruments may also get a boost, including cryptocurrencies, due to Trump’s promise to make the US the “crypto capital of the world”.

At the same time, much of these forecasts depend on Trump pushing through changes to the tax code, regulations and other laws, Channel noted.

“Virtually all of these policies will be difficult to implement, even with Republican control of the House, Senate and presidency,” he said. “With that in mind, we may not see much change at all in the broader economy.”

He added: “Inaction by the next Trump administration could mean the economy continues to lurch along its current course.”