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

President-elect Donald Trump’s victory The November 5th election highlights the confusion of millions of voters, while many Americans have noticed get out of the polls on Tuesday that they are still suffering from the highest prices in 40 years and are not satisfied with the economic conditions of the country.

Trump ran a campaign that promised to deal with those issues, committed to end the “inflation nightmare” and lowering prices “too fast.” He also gave myriads of tax cuts to various groups, from grown ups to the owners of the housesas well as supporting some of those methods new import tariffs from China and other nations and to deport millions of undocumented immigrants.

In the wake of Trump’s victory, economists and policymakers have been evaluating how those policies could affect the economy and consumer finances. Currently, Wall Street is predicting that his policies could boost business growth, sending the S&P 500 higher by about 2.2% on Wednesday.

But some experts note that Trump’s plans could also increase inflation, which could hurt 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, tariffs and immigration issues could have major economic consequences and raise concerns about a second wave of inflation.”

However, compromises or changes in his plans “could reduce the impact,” Mills added.

Of course, whether Trump can respond to the most pressing economic concerns of voters is uncertain, especially if the House of Representatives switches to Democratic control, which could hinder his plans to extend the tax cuts. taxes included in his 2017 Tax Cuts & Jobs Act. Act (TCJA) as well as making other changes.

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

Your income under Trump’s tax plans

The core of Trump’s tax plan is to extend provisions of the TCJA that are scheduled to expire at the end of 2025. These include lower statutory tax brackets and an extension of the standard.

Trump also wants to offer deep tax cuts for some individuals and businesses, with his campaign proposing to lower the tax rate to 15% from its current 21%. He has floated the idea of ​​removing the personal tax on a wide range of income, from tips to Social Security benefits, but has not yet provided details.

Trump’s combination of tariffs and tax cuts would rank as the sixth largest tax cut since 1940, according to a recent analysis by the Tax Foundation.

If Trump is able to make changes to the tax code, personal taxes will decrease for all income groups. But the biggest beneficiaries will be high-income households, according to an analysis from the Penn Wharton Budget Model (That study evaluates Trump’s proposed tax cuts but excludes the impact of tariffs.)

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

What will happen to inflation?

Consumers rank inflation as one of their top economic concerns, and many are feeling the pinch from rising prices during the pandemic. Although the US inflation rate has fallen near the Federal Reserve’s 2% annual goal, Many Americans still describe it as high because prices have not come down; instead, prices are rising more slowly than they did during the pandemic.

Economists have warned that Trump’s plans could restore inflation. That’s because the tariffs are actually sales taxes paid by American consumers, as opposed to countries that export goods to the U.S. In addition, Trump’s plan to deport millions of immigrants could also increase inflation as employers may they face higher wages due to the shrinking workforce. .

“The two main pillars of his policy proposals, tariffs and mass layoffs, are likely to cause prices to rise as they will make it harder for businesses to produce goods,” Jacob Channel , chief economist at LendingTree, told CBS MoneyWatch.

Trump’s plan to impose a 10% tariff on all imports and 60% or more on Chinese imports to the US could add $1,700 a year in additional costs for the average middle-class family, according to the Peterson Center for International Economics. .

Trump’s plans could raise 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.

Skiba said: “If you add 1% to next year’s price figures, we should stop reducing rates.”

Can the economy grow faster?

The economy could grow slightly faster under Trump’s plans to cut corporate taxes, but that stimulus could wear off over time, largely because of the impact of deporting millions of immigrants, according to Oxford Economics.

Real GDP growth could be 0.3 percent higher in 2026 than if current economic policies continue, wrote Ryan Sweet, chief US economist at Oxford Economics, in a research note November 6th.

But, he added, GDP growth could end up falling to 0.6 percent lower in 2028 than earlier estimates due to the impact of deportations and higher tariffs.

Will housing be affordable?

Probably not, according to Bright MLS chief economist Lisa Sturtevant.

First, if Trump’s plans control inflation as some economists predict, the Federal Reserve may not continue to lower its benchmark rate. Without further reductions in the cost of lending to consumers and businesses, mortgage rates are unlikely to fall, he added.

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

“His proposed mass redundancies will have a devastating effect on the construction industry, reducing the already restricted workforce and halting much-needed new construction,” he said. “At the same time, the proposed fees will increase the cost of the building.”

Will Trump’s policies help your 401(k)?

Perhaps, given that Trump’s proposal to cut taxes and promote lighter corporate regulations, if implemented, could boost corporate profits and boost the stock market.

On Wednesday, indices including the S&P 500 and the Dow Jones Industrial Average, soared with Wall Street hoping for strong business growth.

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

Other financial instruments may also gain strength, including cryptocurrencies, due to Trump’s pledge to make the US “crypto capital of the planet.”

At the same time, most of these predictions are based on Trump pushing changes to 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, Senate and president,” he said. “With that in mind, we may not see much change at all in the broader economy.”

He added, “Inaction from the next Trump administration could mean that the economy continues to collapse in the way it is now.”