The Trump Effect: Will Your Finances Soar or Crash?

The voters spoke on November 5, electing former President Donald Trump to another term. With him set to take office on January 21, 2025, his policies have taken center stage.

Economic and tax experts are taking a look at each of the policies Trump and his second-in-command, Vice President JD Vance, were touting on the campaign trail. Now that he’s headed back to the White House with a majority Republican Congress, there’s a very real chance he can make many of these a reality.

These are just some of the possibilities facing the US. Remember, these are just proposals and many could shake out very differently when presented to Congress, especially if changes are made.

Tax Cuts

One of Trump’s major accomplishments as president was the passing of the Tax Cuts and Jobs Act (TCJA), which is set to expire in 2025. Most of the tax cuts benefitted the wealthy, though middle and working-class Americans saw a significant increase in the standard deduction plus a rise in the child tax credit.

Trump has already signaled he plans to extend the TCJA as well as pursue other types of tax cuts that could put money back in Americans’ pockets.

Healthcare

Trump has made no bones about wanting to repeal the Affordable Care Act (ACA). Though he failed, he did do away with the penalty for not maintaining healthcare and help expand short-term plans.

There’s concern that the tax subsidies reducing insurance plan costs could disappear after 2025 if it’s not extended. There’s also talk about wanting to repeal the Inflation Reduction Act, which would also eliminate those subsidies, increasing the cost of healthcare. The good news, though, is Trump has committed to protecting Medicare, which millions rely on.

Social Security

Social Security is facing a big conundrum. The trust funding the federal program is set to run out in less than a decade. Tax experts believe that despite Trump firmly stating he plans to protect the program, his policies will speed up the insolvency.

There’s also the matter of Trump wanting to do away with tax on Social Security benefits, which would put more money in beneficiaries’ pockets.

Inflation

This was a major sticking point during the 2024 presidential election. Many who voted for Trump said they did so because of inflation and the current state of the economy. The economy has actually rebounded very well since the pandemic era, but costs remain high.

Trump has sworn to bring prices down, but some of his policies—if they pass— could be very expensive, which would lead to an uptick in not just inflation, but also overall costs. Most of that has to do with the president-elect’s desire to impose tariffs.

Tariffs

The thought process behind tariffs is to encourage less importing and more domestic manufacturing. It’s also meant to discourage offshoring and create more jobs in the US. Both of these are good for the US, but it comes with a caveat.

Current proposals suggest a 60% tariff on China-based goods, 25% to 100% on Mexican imports, and 20% for other countries. These taxes will likely be passed down to the consumer at the time of purchase, leading to increased costs. In an October earnings call, several CEOs signaled they were set to increase prices if they faced tariffs.

Housing Market

One of the major problems the US faces is a housing shortage and that’s keeping prices up, bordering on unaffordable for many. While on the campaign trail, Trump said the government would open federal land tracks for building homes.

However, other parts of his policies could impact affordability one way or another, including deregulation, immigration, and the aforementioned tariffs.

Deregulation Would Decrease Home Prices

Before he exited office the first time, Trump signed an executive order that created “Eliminating Regulatory Barriers to Affordable Housing: Federal, State, Local and Tribal Opportunities.” This cut regulations associated with homebuilding.

Trump says eliminating these regulations and permitting would help reduce housing costs by half.

Immigration and Tariffs Would Increase Home Prices

If Trump were to carry through with the mass deportations he has promised, that could impact home prices as well. Many construction companies rely on immigrant labor to build homes and other structures.

Removing a large part of the workforce would likely lead to increased costs because the companies would have to pay increased wages. Then, the tariffs come into play again, potentially driving up prices because the materials imported would cost more. Those increased prices would trickle down to the homebuyer.

Fewer Potential Federal Interest Rate Cuts

If Trump’s policies were to drive inflation higher, the Federal Reserve wouldn’t cut interest rates further. In fact, to balance out increasing inflation, it might even raise them again.

Increased interest rates mean higher costs of borrowing, and that affects credit cards, mortgages, and other types of consumer debt.