What a Trump victory means for the US economy

Donald Trump's victory in the 2024 US presidential election is likely to usher in a series of economic changes at home and abroad, affecting everything from foreign trade to the independence of the US Federal Reserve.

He will benefit from an economy that is in good shape, with strong growth, low unemployment and inflation that is quickly approaching the Federal Reserve's long-term 2 percent target after years of higher interest rates.

But his victory came as voters expressed dissatisfaction with the cost of living, driven by a post-pandemic spike in inflation that drove up consumer prices by more than 20 percent.

While many of the new Republican president's proposals will ultimately live or die in Congress — which controls the finances of the world's largest economy — he can still do a lot to shape economic policy.

– Customs and Trade –

During the campaign, Trump said he would impose blanket import tariffs of between 10 and 20 percent to raise revenue, protect domestic industries and bring jobs back to the United States.

He has also threatened to impose a 60 percent tariff on Chinese goods and has even imposed a levy of over 200 percent on Mexican-made cars.

“To me, 'tariff' is a very nice word,” he said in a recent interview with Fox News. “It is a word that will make our country rich again.”

Trump “has made no secret of the fact that he is very fond of tariffs as a policy tool,” Kimberly Clausing, a non-resident senior fellow at the Peterson Institute for International Economics (PIIE), told AFP on Tuesday, adding that she was walking away from them indicated that he would agree to introduce high tariffs if elected.

If implemented, these measures will undoubtedly have a significant impact on U.S. and international trade, redirecting the flow of goods and reshaping international economic relations.

While they will raise some revenue, they will also hit U.S. businesses and consumers hard, according to a recent paper from the nonprofit Tax Foundation.

If enforced, Trump's proposed tariff hikes would increase taxes on businesses by an additional $524 billion annually, shrink GDP by at least 0.8 percent and reduce employment by nearly 700,000 full-time equivalents, the researchers estimated.

“I think it's just a very quick way to shoot the U.S. economy in the foot, if not in the foot,” said Clausing, a former deputy assistant secretary for tax analysis at the U.S. Treasury Department during the Biden administration.

The story continues