From Ballots to Balance Sheets: Exploring the Economic Impact of a Trump Administration

Jonathan Leathem

Pre-election Predictions

Before the 2024 U.S. Presidential Election, various projections were forecasting a highly competitive race, with many sources giving Donald Trump a narrow edge, with a 54% chance of winning. Ultimately, the economic landscape of America (and potentially the world) was going to shift regardless of the outcome, as both candidates, Trump and Harris, had differing yet equally ambitious plans for progressing the U.S. economy. A Harris Administration would have expanded government social programs, which included universal pre-K and paid family leave, boosting consumer spending, particularly in lower-income groups, catalysing economic growth whilst possibly increasing the federal deficit in the short term. In contrast, a Trump Administration would have shifted America away from a ‘greener” economy, and back towards a less regulated energy sector, which would spur economic growth but also raise concerns around sustainability and consumer safeguards.

Typically, the U.S. stock market encounters challenges leading up to presidential elections. Yet, this time, these challenges were not as apparent. The reasoning behind this was due to the optimism around the economy. Moreover, there was an anticipation of a Fed interest rate cut down to 4.75%, which came into fruition following revised U.S. employment figures, which have decreased in recent weeks.

US Interest Rate

The Trump “Doom Loop” Effect

As soon as Trump won the presidency, key economists began discussing the implications of a Trump Administration on the financial markets, with many focusing on the U.S. dollar’s role as a global reserve currency. Furthermore, many believe that Donald Trump’s return to power would give way to the “doom loop” phenomenon, where rising dollar values lead to booming pressures in other countries, especially those with substantial dollar-denominated debt.

These concerns were raised because of Trump’s future policies appearing to be rather inflationary. Whether it be Trump’s plans to dramatically cut taxes, fuelling consumer spending, or to restrict immigration, tightening the labour market and pushing up wages, key economists have a strong reason to be concerned. Most notably, through Trump’s ‘America First” trade policy, a promise was campaigned to impose tariffs of between 10% and 20% on imports and as much as 60% on Chinese goods specifically. Ultimately, many economists are now claiming that this is “bad news for Europe”, the UK, and the U.S. in the long run.

The Economic Outlook for America and Global Trade

In aggregate, whilst nobody, including the President, can dramatically shift fundamental economic factors like unemployment, the various policies Trump wants to implement can certainly reshape the economic outlook for the U.S. For example, the Trump Administration has been a strong supporter of fossil fuels, including coal, oil and gas - which account for an already alarming 79% of America’s energy consumption - and has vowed to potentially further the usage of these fuels, boosting sectors of the economy, particularly energy and manufacturing, whilst potentially delaying the U.S. transition to cleaner energy sources and, in turn, causing environmental and sustainability issues. Moreover, Trump’s policies are likely to focus on aiding domestic manufacturing and increasing investment in infrastructure, further improving sectors of the economy and employment.

Projected Percent Change by Industry in Wage and Employment, Projected 2023-33

Additionally, the economic outlook for the rest of the world in light of Donald Trump’s victory, especially regarding trade, could be marked by both challenges and opportunities. Undoubtedly, Trump’s policies will globally reshape trade, with Trump’s large tariffs posing a significant risk to UK exports to the U.S., which account for over £60 billion in goods, alongside the exports of other vital trading partners of the U.S., who may face higher costs for their businesses, diminishing the attractiveness of the U.S. market. Ultimately, these “Trump tariffs” could easily give way to China becoming an even more significant global player. Donald Trump’s confrontational policies could inadvertently benefit China by weakening the bonds between the U.S. and its trading partners, caused by high tariffs, creating a vacuum in the global leadership space that China could easily fill through forging and strengthening relationships with countries that wish to move away from their reliance on the U.S. and its aggressive regulations.

Conclusion

In conclusion, the economic impact of a Trump Administration will resonate across various sectors of the U.S. economy. Whilst it is important to remember that not even the President can shift core economic factors, Trump’s intense policies, which focus on energy independence, trade protectionism, and job creation, will certainly bring their own benefits, together with numerous drawbacks. Overall, Trump’s economic agenda will spark debates over long-term sustainability versus short-term gains, leaving an indelible mark on the nation’s economic landscape, alongside global trade.