Donald Trump secured a second term in office on November 8, 2024, raising significant concerns among investors and economists regarding future inflation and Federal Reserve policies. Following the election, Treasury yields experienced a notable increase, reflecting heightened fears about inflation [f3f5a6db]. Trump's proposed economic measures, including tariffs of up to 60% on Chinese goods and 20% on products from other countries, have the potential to drive consumer prices higher [f3f5a6db]. Analysts from Wells Fargo have indicated that even a modest 10% tariff could elevate core inflation from 2.7% to 4%, further complicating the economic landscape [f3f5a6db].
In a recent analysis, economist Larry Summers warned that Trump's campaign promises, which include substantial tax cuts and tariffs, could exacerbate inflationary pressures. Core inflation currently sits at 2.6%, exceeding the Federal Reserve's target of 2% [36734e8b]. Summers highlighted that inflation has already reached its highest level since 1981, with food prices increasing by 21% over the past three years, underscoring the risks associated with Trump's economic agenda [36734e8b].
In Michigan, business leaders are expressing a desire for certainty in tax rates and regulations, as Trump's presidency may bring economic instability. Charley Ballard, an economics professor at Michigan State University, warns of potential disruptions in the state's economy due to Trump's policies [b6328b6a]. Trump's aim to revitalize manufacturing jobs and revolutionize the auto industry is met with skepticism, especially given his proposed tariffs, which could raise consumer prices significantly and ignite inflation. The Tax Foundation estimates that a 20% tariff could cost households an additional $2,045 annually [b6328b6a]. U.S. companies are lobbying against these proposed tariffs, indicating a divide between Trump's administration and the business community [b6328b6a].
In Nevada, Trump's election introduces considerable uncertainty into the state's budget forecast. The Economic Forum is set to finalize the revenue forecast by December 3, 2024, just before Trump's inauguration. Economist Emily Mandel from Moody's Analytics predicts a challenging budgeting cycle due to potential shifts in economic policy under Trump, particularly if a Republican trifecta emerges in Congress [2e9cd665]. Moody's expects real GDP to decline under Trump's administration, with proposed tariffs likely increasing inflation and immigration measures potentially reducing the labor force [2e9cd665].
Trump's victory is viewed as a potential economic win for seniors. During Biden's presidency, inflation averaged 5.2%, compared to 1.9% under Trump, which has led to financial strain for older Americans. Reports indicate that 50% of seniors dipped into emergency savings, and 25% delayed retirement due to inflation [7d9e038d]. Social Security cost-of-living adjustments (COLA) fell short by 46% in 2022, exacerbating the financial difficulties faced by many in this demographic [7d9e038d].
The American Family Survey conducted by YouGov from August 22-29, 2024, showed that inflation was the top economic concern for nearly 90% of respondents, with 55% expressing significant worry about rising prices [19646ad1]. This concern was particularly pronounced in battleground states like Texas and Michigan, where voters felt the disconnect between job growth and their personal economic struggles [24c0b9d4].
Despite recent reports indicating that inflation has cooled to around 2.1%, the lingering effects of high prices have left many voters frustrated. Grocery prices, while stabilizing, remain elevated, contributing to ongoing discontent among consumers like Tamira Flamer, who expressed her dissatisfaction with the costs of essentials [f3cd62e7]. The sentiment among voters has been that the Biden-Harris administration's economic policies, termed 'Bidenomics', have failed to address their concerns adequately [99ab7c71].
Trump's plans to eliminate taxes on Social Security income could save seniors approximately $94 billion, which is seen as a significant relief for this demographic [7d9e038d]. He also aims to lower inflation by boosting American energy production and restoring executive branch impoundment authority to cut government spending. Additionally, Trump intends to extend and expand the 2017 Tax Cuts and Jobs Act, which he argues will benefit all Americans, not just seniors [7d9e038d].
In Nevada, Governor Joe Lombardo has expressed optimism that Trump will help reduce the cost of living, although concerns remain about the potential impacts of mass deportation, which could decrease U.S. economic productivity by 7.4% [2e9cd665]. The Federal Reserve's recent decision to lower interest rates by 0.25% on November 9, 2024, suggests confidence in controlling inflation, but the Economic Forum will reconvene on December 2, 2024, and again in May 2025 to adjust forecasts based on federal actions [2e9cd665].
The historical context of inflation crises leading to government turnover in 58% of cases suggests that the economic landscape could have lasting implications for future elections, including the 2026 midterms [b78ae76d]. In the aftermath of the election, Trump's victory was attributed to his perceived capability in handling economic concerns, despite the administration's claims of stabilizing inflation [0abcf106]. Voters like Danielle Williams recalled feeling economically secure during Trump's presidency, further influencing their decisions at the ballot box [2ae6d974].
As Trump's administration begins, the implications of his economic policies will be closely scrutinized. Rising Treasury yields are expected to increase borrowing costs for mortgages and loans, which could further strain household budgets [f3f5a6db]. According to a recent analysis by Marketplace, if Trump implements his promised fiscal policies, U.S. government finances could deteriorate significantly, with estimates suggesting that his tax promises could exceed $10 trillion, risking a substantial increase in the deficit [25cfd9f5]. Jason Furman, a former economic advisor, noted that many economists believe Trump's policies are poorly designed and overly expensive, which could lead to increased borrowing and higher market interest rates [25cfd9f5]. Trump's proposed tariffs could exacerbate inflation, reducing after-tax income for many Americans, with 45% of voters feeling worse off than four years ago despite a lower unemployment rate [25cfd9f5]. Federal Reserve Chair Jerome Powell has emphasized a data-driven approach and the importance of Fed independence, raising concerns about Trump's influence over monetary policy stability [f3f5a6db]. Investor sentiment remains cautious despite the S&P 500 reaching record highs, as the interplay between Trump's policies and inflation continues to unfold [f3f5a6db].
In the wake of Trump's election, the market has responded with a rally in the dollar and a sell-off in U.S. bonds, while equities have jumped, indicating a mixed sentiment among investors [d6863b17]. Trump's promises of tariffs on imports, particularly from China, come as the U.S. trade deficit remains near record levels, raising concerns about potential labor shortages due to expected declines in immigration rates [d6863b17]. The anticipated lower taxes and deregulation, including a possible reduction in corporate tax rates, are expected to contribute to a significant rise in federal debt, which could complicate future fiscal policy [d6863b17]. The Federal Reserve's interest rate cuts may be limited due to ongoing inflation concerns, with the market now pricing in a Fed policy rate of 3.6% by the end of 2026 [d6863b17].
Dr. David Phelps from Newsmax emphasized the critical nature of the 2024 election due to economic challenges such as soaring inflation, stagnant wages, and low consumer confidence. He noted that Trump's administration aims to reduce government spending, which previously led to a significant national debt increase, now nearing $35.94 trillion and rising by $1 trillion every 100 days [a0061ec2]. Phelps advocates for aggressive fiscal policies to combat persistent inflation and highlights the potential economic boost from increased U.S. liquefied natural gas supply proposed by EU's Ursula von der Leyen [a0061ec2]. The stock market saw a rise of over 1,200 points post-election, but caution against overspending is advised despite this economic optimism [a0061ec2].
The ongoing discourse surrounding inflation and economic policies is expected to remain a focal point in political discussions as the nation moves forward, underscoring the importance of economic issues in shaping electoral outcomes.