U.S. President-elect Donald Trump is set to inherit a strong economy, but his aggressive policies—tariffs, immigration restrictions, and tax cuts—might disrupt growth. With output above trend, near full employment, and persistent inflation, the economy may require stability over drastic reforms.
Experts, including Moody's Chief Economist Mark Zandi, warn that Trump's proposals could harm the economy, depending on their execution. Karen Dynan from Harvard University notes that inflation remains high, federal deficits are larger, and borrowing costs have surged since his last term. Immigration-driven labor force growth, which bolstered recent economic performance, contrasts with Trump’s restrictive stance.
During Trump’s first presidency, the economy benefited from tax cuts, despite global setbacks from tariffs. However, today’s landscape is different. Inflation exceeds the Federal Reserve’s 2% target, mortgage rates approach 7%, and 30-year Treasury yields climb, signaling market concerns over fiscal discipline. Fed Governor Christopher Waller highlights inflation and deficits as pressing issues, warning of market demands for higher premiums if fiscal policies don’t change.
Despite challenges, the U.S. economy is robust. December’s 4.1% unemployment rate and 256,000 job gains show resilience. Fed Chair Jerome Powell praises the economy’s performance but stresses cautious monetary policy to stabilize inflation.
The uncertainty surrounding Trump’s economic vision contrasts with the current strength. Richmond Fed President Tom Barkin acknowledges optimism among businesses but advises flexibility to counter potential disruptions from tariffs or deportations.
Balancing reforms with economic stability will define Trump’s presidency as he navigates a high-performing yet delicate economic environment.


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