Global (Commonwealth) _ Donald Trump‘s extraordinary economic policy plan has garnered a lot of attention. However, other actions he has described that would impair US policies and raise doubts about America’s dependability as an ally may pose the most long-term risks to the US economy.
U.S. President Donald Trump’s economic initiatives since taking office have been hailed by CEO Brian Moynihan as a “good thing” for business on Tuesday. “They want to see the U.S. economy grow and prosper,” Moynihan stated in reference to the Trump government during a Tuesday interview with Reuters.
At the annual meeting of the World Economic Forum in Davos, Switzerland, business leaders and policymakers are analyzing the economic effects of Trump’s inaugural executive orders.
Trump pledged to take action in five key areas of economic policy prior to the election. He promised to implement tax cuts that would generate up to $8–10 trillion in stimulus, impose tariffs of 10–20% on all US trading partners and 60% on China, deport up to 11 million undocumented migrants, unleash a wave of economic deregulation, and drastically reform the federal bureaucracy in order to increase efficiency and reduce “enormous amounts” of waste.
In addition, he pledged to reverse the Biden administration’s climate-friendly policies, put an end to the conflict in Ukraine, and intensify measures to limit China’s access to American technology. It’s unclear exactly what the president-elect intends in each issue area.
Trump’s activities as president-elect have not significantly altered this package. In addition to having the necessary training and expertise (unlike some of his other choices), his candidates for the key economic positions—Bessent at Treasury, Lutnick at Commerce, Greer at USTR, and Hassett at CEA—strongly endorse his objectives and strategies.
It is more difficult to forecast how Elon Musk‘s hiring as Trump’s adviser will affect the effectiveness of government. However, it is unclear exactly what the president-elect desires in each area of policy. Furthermore, it is unclear how he will react to domestic or international opposition.
Trump may therefore be using them as leverage to negotiate advantages for the US rather than expecting to apply universal tariffs. If so, how other nations react will determine the result. China and the EU, the two main trading blocs, would probably launch targeted retaliation but will also try to engage in dialogue.
Payments for social security, Medicare, defense, debt interest, and transfers to states account for more than 80% of federal spending. There is only $1.1 trillion left to absorb changes because these areas are either required or politically virtually untouchable.
Social Security, Medicare, defense, debt interest, and state transfers account for 80% of federal government spending.
A large portion of this expenditure has strong political backing or is essential to the US economy’s functioning. Therefore, it seems that Trump’s ability to significantly reduce federal expenditure is limited.
It is consequently more likely that the US national debt, which is currently at 120% of GDP, would rise again. Given the robust global demand for US assets, this is unlikely to have any major short-term economic repercussions.
Given that Republicans control Congress and that Trump appointed the key regulators, there may be more room for deregulation to exert influence. Along with measures to lessen restrictions on cryptocurrencies, the goal appears to be rolling back banking laws put in place following the global financial crisis. Trump may also take steps to reduce sanctions against Russia and repeal climate-friendly laws.
But when the federal government steps aside, certain important Democratic-led states—most notably California and New York—may take over. Given the dire ramifications for the country’s overall technological leadership, the administration may reconsider delaying the US’s transition to electric vehicles.
It’s also uncertain if Trump will completely back out of Biden’s efforts to limit US big tech’s dominant position. Trump might increase the use of economic and financial sanctions against China, Iran, and other nations even while he might remove them from Russia.
