WASHINGTON (AP) — Like most presidents, Donald Trump Faced with an economy that rarely lends itself to political ambitions.
Republicans have promised strong growth, higher rates, income tax cuts and booming oil fields. But despite a solid job market and a low 4.1% unemployment rate, he has to contend with headlines like inflation, a budget deficit, rising tensions over trade, his plans to reduce immigration and a persistent wealth gap. Will be.
Each of these issues could help shape how voters feel about a president returning to the White House with the specific goal of fixing the economy.
For his part, Trump wants to blame all the challenges facing him on his predecessor, Joe Biden, who in turn blames Trump in 2021 for the problems that led to his own administration to deal with. had to face its own problems.
“It starts with confronting the economic chaos caused by the last administration’s failed policies,” Trump said. World Economic Forum On Thursday
Here are five economic forces that could shape the first year of Trump’s presidency.
For voters, the price still isn’t right
Inflation is easier said than done.
In the AP Votecast, a broad survey of voters last year, 10 in 10 voters called inflation the “single most important factor” in their choice for president. About two-thirds of that group voted for Trump—a sign that he owed his victory in large part to higher prices for groceries, gasoline, housing, autos and other goods.
Going forward, monthly reports on the consumer price index will be a clear measure of whether or not Trump can deliver. But inflation has actually increased in recent months. Consumer prices rose at a healthy 2.4% annual rate in September, compared with 2.9% in December. Economists say inflation could rise if Trump imposes rates and uses deficit-financed income tax cuts.
Republicans often hit Biden hard on egg prices. But Democrats could use similar attacks on Trump. Over the past year, coffee costs have risen only 1% for US consumers, but International Monetary Fund The price of actual beans is climbing 55 percent, signaling that barley lattes, espressos and plain old cups could soon cost more.
Then there is accommodation. Voters are frustrated by high mortgage rates and high prices due to a shortage of properties. Shelter users account for 37% of the price index. Prices for housing have eased, but shelter costs are still rising at 4.6% a year compared to annual growth. Averaged 3.3% before the pandemic.
According to the government, Trump is betting that greater energy production can lower inflation rates, but domestic production is already near record levels.
What revenues are actually coming in?
Trump says 25% tariffs are coming Mexican and Canadian imports As soon as February 1st. He has also talked about additional tariffs of 10% on Chinese goods. Its stated goal is to stem the flow of illegal border crossings and chemicals used to make drugs like fentanyl.
For Trump, the tariffs are a diplomatic tool for his policy goals. But they are also a threat that could potentially derail trade negotiations. They are also the recipients of a tax that they claim could bring in trillions of dollars to the Treasury.
Trump raised revenues during his first term, doubling revenues to an annual rate of $85.4 billion a year, which sounds like a lot but was only 0.4 percent of gross domestic product. Multiple reviews by The Budget Lab at Yale And Peterson Institute for International Economicsamong others, argue that threatened tariffs would increase the costs of a typical family in a way that would effectively increase taxes.
What really matters is whether Trump delivers on his threats. That’s why former Biden adviser Ben Harris, now director of economics at the Brookings Institution, says voters should focus on average tariff rates.
“Trade is really hard,” Harris said. “But in broad terms, look at what he does and not what he says.”
What happens to the national debt?
Trump likes to blame inflation on the national debt, saying Biden’s policies have flooded the U.S. economy with more money than it should have. But according to the Committee for a Responsible Federal Budget, a fiscal watchdog, only about 22% of the $36 trillion in outstanding debt originated from Trump’s first-term policies.
Paul Winfrey, a former Trump staffer who is now president and CEO of the Center for Economic Policy Innovation, warned in a recent analysis that the U.S. is getting too close to easing its fiscal cap. Their analysis shows that if Trump can preserve 3% growth, he can extend the tax cuts that expire in 2017 while reducing the debt by $100 billion a year to $140 billion. Keep stable.
The risk is that higher borrowing costs and debt could limit Trump’s operations while borrowing costs are higher for consumers. Lawmakers who once saw debt as a one-time problem quickly see it as something to fix.
“One of the biggest shifts I’m picking up now among policymakers is that they’re starting to have a sense of the long term today,” Winfrey said.
Winfrey said the key number to watch is interest rates charged on U.S. debt — which will tell the public if investors think the amount of borrowing is problematic. Interest on the 10-year U.S. Treasury note has been around 4.4.6 percent since September, up a full percentage point since September.
Immigrants are still needed to fill jobs
Trump’s executive orders are a clear crackdown on immigration — and could drag down economic growth and slow monthly job gains. Trump often frames immigration as a criminal and national security issue by focusing on people crossing the border illegally.
But economies that can’t add enough workers risk stagnation — and at this point the U.S. labor market needs immigrants as part of the job mix. About 84% of America’s net population last year came from immigrants Census Bureau. That’s 2.8 million immigrants.
“They not only work in the economy, they spend in the economy,” said Satyam Pandey, chief U.S. economist at S&P Global Ratings. “Their spending is someone else’s income in the economy.”
If Trump were to hold back his 2017 and 2019 immigration cuts of 750,000 immigrants a year, growth could slow to 2 percent, down from 2.7 percent last year, Pandey’s analysis said. Construction, agriculture and the entertainment and hospitality industries will probably struggle to find employees.
In other words, it is able to report monthly jobs and monitor immigration flows.
Keep in mind the wealth gap
Trump has to figure out how to balance the interests of billionaires with his blue-collar voters. Among its inaugural events were several of the world’s richest men: Tesla’s Elon Musk, Amazon’s Jeff Bezos, Meta’s Mark Zuckerberg and LVMH’s Bernard Arnault. Each is worth about $200 billion or more, according to the Bloomberg Billionaires Index.
Scott Ellis, a member of the group Patriotic Billionaires, said it’s worth monitoring how much his wealth grows under Trump. This year, as of Friday, Arnault’s net worth is $23 billion, Bezos’s $15 billion, Zuckerberg’s $18 billion and Musk’s $6 billion. They are all monthly increments.
In contrast, the most recent data from the Census Bureau shows that the median American household wealth increased by $9,600 to $176,500 in 2021-2022.
