Donald Trump is president, again. There is a lot that comes with that, but we’ll focus on his proposed economic policies, and what it all might mean for business.
Let’s start with a hotly debated topic: tariffs.
Tariffs are taxes imposed by one country on goods imported from another country; they’re baked into prices of products, so they aren’t always talked about among typical Americans (among economists, well, that’s a different story). What you need to know is the importing company pays the tariff, not the exporting one, as Fortune’s Geoff Colvin previously explained. Companies often pass on as much of that cost as they can to consumers.
Trump has proposed a 60% tariff on all Chinese imports and a universal 10% tariff on imports from all countries, a practice unseen since World War II. Six years ago, Trump called himself “a Tariff Man.” This year, on the campaign trail, he stressed tariffs can be used as a penalty or threat of sorts to keep other countries in line and elevate America. At a rally in June, he said: “We are going to be so tough, and if a country is not going to behave, we’re going to tariff the hell out of that country.”
But tariffs might not actually be great for everyday people. His tariffs could cost a middle-income household $1,700 a year, according to the Peterson Institute for International Economics. If that 10% universal tariff were to actually be a 20% universal tariff, which he has floated, it would cost that same middle-income household $2,600 a year.
Higher tariffs do not go hand in hand in with what economists call free trade; and again, six years ago, Trump said, “trade wars are good, and easy to win.”
Two economists previously told me tariffs were one part of Trump’s policy proposals they considered inflationary, another was his potential tax policies. Wall Street is anticipating lower taxes, for one. Trump has called for lowering the corporate tax rate to 15% for certain companies, he’s teased an end to taxing tips, and he’s even flirted with eliminating federal income taxes. Not to mention, he wants to extend parts of a 2017 law passed in his first term, particularly income and estate tax cuts, that are set to expire at the end of next year.
And in terms of regulation, his policies aren’t very surprising: Republicans and deregulation often gang together like salt and pepper. Businesses typically love that; crypto definitely does. But let’s take a moment to consider the world of housing, something Federal Reserve Chair Jerome Powell has said the central bank can’t fix, even if it has managed to tamp inflation down. Housing could be at the root of this widespread dissatisfaction with the economy, and apart from mass deportation, Trump seems to waffle on the issue.
Four years ago, Trump and Ben Carson, his secretary of Housing and Urban Development, wrote a commentary in the Wall Street Journal titled: “We’ll Protect America’s Suburbs.” They condemned abolishing single-family zoning and building apartments in certain neighborhoods. This year, on the campaign trail, when he was still running against Joe Biden, Trump said he’d stop Biden’s “sinister plan to abolish the suburbs.” But in an interview with Bloomberg, he called zoning “a killer.” You can’t punish blue cities for strict regulations while protecting suburbs and allowing their exclusionary practices, an economist previously told me.
Congress holds the power of the purse though, we can’t forget that, even if there are things Trump can implement via executive order. Republicans have won control of the Senate, but the House is still up for grabs, at the moment. Either way, if there is one thing to consider with this Trump win, it’s that a lot of Americans trust him with the economy—that is despite the fact that economists expect prices to rise under him. Even so, markets are surging on his win.
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