Donald Trump will enter his second term as President of the United States. However, analysts have raised concerns about Trump's promises and their impacts on the U.S. economy. Three specific economic policies—tariffs, Bitcoin reserves, and immigration—could have significant consequences on inflation, growth, and stability.
Trump needs to outline the causal relationship.
The President of the United States has been re-elected, Donald Trump has a huge task at hand—keeping the promises made during his campaign while still supporting the U.S. economy. Analysts are closely monitoring potential risks if Trump does not think carefully.
First is to rein in inflation without dragging the economy down. However, he previously stated that he would 'end' inflation while imposing tariffs. Reports note that these additional costs will raise prices on many types of goods. According to data from the National Retail Federation, Americans could lose up to $78 billion due to these new tariffs.
And thus, the outcomes may be contrary to the desires of the 47th president. Former head of the Obama auto task force, Steven Rattner, stated, 'The plan to increase tariffs, deport millions of people, and undermine Trump’s central bank independence will cause prices to skyrocket.'
He believes it will add about 7.4 percentage points to U.S. inflation. The additional costs will pressure both individual consumers and businesses if the government imposes new tariffs. Even if the incoming Trump administration decides to ease some tax burdens, it will not offset the burden of higher prices. Trump believes tariffs are 'the greatest thing ever invented,' but companies relying on imported goods will not think so and will simply pass the costs onto customers. Right after Trump wins the 2024 election, reports indicate that the wealthiest have added billions of dollars to their assets. During Trump's first term, tax reforms, specifically the Tax Cuts and Jobs Act (TCJA) of 2017, were considered to largely benefit high-income groups. Trump may want to analyze better whether the benefits are spreading.
The economy must be prioritized over promises.
Secondly, Trump has emerged as an elected president supporting Bitcoin in this election. He not only proposed making America the cryptocurrency capital, but Trump is also pushing for a 'strategic reserve.' Meanwhile, Senator Cynthia Lummis has also proposed that the administration manage government loans through Bitcoin reserves to reduce future debt by 50% in the coming years.
Gold has been a reserve. But Trump will have to test the feasibility of Bitcoin regarding the national debt to play that role. Therefore, passing the Bitcoin Act needs to be a separate issue for Trump. An issue that should not affect the administration's debt plans.
Ultimately, the world clearly sees that Trump's re-election means there will be a reform of immigration policy. The ACLU has raised concerns about the militarization of deportations. Rights advocacy groups and asylum programs are likely to oppose some anticipated restrictions. Workers in the United States may see less friendly border policies.
Economically, commentators believe that reducing the workforce will directly impact the country’s growth. Stan Veuger, a senior fellow in economic policy research at the American Enterprise Institute (AEI), explains that a smaller workforce will slow down the overall job growth rate by about 60,000 new jobs per month by 2025.
Robert Reich, co-founder of Inequality Media, said, 'This could be both a humanitarian disaster and an economic disaster that will destroy the economy, drive up food and housing prices, and balloon the deficit.' According to Reich, if undocumented workers, who do essential but low-wage jobs in agriculture, construction, and caregiving, are deported, this will create major challenges. Many industries among these depend heavily on these workers, so losing them will lead to labor shortages. Reich, a professor and political commentator, sees issues such as food shortages, high housing costs, and a slowing GDP if these policies are implemented.
Trump's second term offers him an opportunity to strengthen the economy only if he avoids 3 traps. Tariffs, if increased carelessly, could raise inflationary pressures, harming consumers. Strategic Bitcoin reserves could cause volatility and further raise concerns about the national debt. Tightening immigration could lead to labor shortages, slow economic growth, and impact key sectors.
