On November 5th, Donald Trump was elected President of the United States. Over the following week the stock market spiked as many investors showed optimism for the effects of his future economic policies.
Many are familiar with general statements that the Trump campaign made regarding their approach to the economy, however, most people don’t know much of the policy details. That’s why we want to explain three of the major economic policies that Trump has proposed and share comments from both critics and supporters regarding each one.
None of the policy descriptions are comprehensive as we are only providing some highlights. We hope that hearing from both sides will help you get a better idea of the economic impact of a Trump presidency over the next four years.
1. New tax cuts in addition to TCJA Renewal
The policies:
- A proposal to renew the Tax Cuts and Jobs Act of 2017 which is currently set to expire at the end of 2025.
- For individuals, this increased standard deductions, lowered rates for most tax brackets, raised child tax credits, and increased the estate tax exemption to exclude estates worth less than $13.6 million.
- For businesses, it created a single corporate tax rate capped at 21%, provided more flexibility with business expensing, and allowed for more tax deductions for certain small businesses.
- End tax on Social Security income.
- End Tax on tips for service workers.
Critics Say:
“…some of his tax proposals are poorly designed and would worsen the structure of the tax code while only creating a muted impact on long-run economic growth, such as the exemptions for tips and Social Security income.
On a conventional basis, we estimate Trump’s proposed tax changes would reduce federal tax revenue by $3 trillion from 2025 through 2034. The revenue loss falls to $2.5 trillion on a dynamic basis.”
-The Tax Foundation
Supporters Say:
“Trump offers straightforward pro-growth economic policies consistent with the plan he successfully implemented during his first term in office, as most voters fondly recall.
He would keep tax rates low, encouraging investment and consumer spending, reduce growth-hobbling business regulation, and expand America’s domestic energy production, reducing the cost of literally everything.”
-Any Puzder, Fox News
2. Increase U.S. Oil Production
The policies:
Trump has stated that he plans to cut regulations that have limited or slowed the production of oil in the United States. This includes the drilling for oil on public lands which the Trump adminstration believes will vastly increase U.S. oil production.
Critics Say:
“Oil companies are already signaling they will pull back on drilling next year as crude oil prices sag. U.S. oil and gas output soared to record levels under the Biden administration, and Trump’s energy policies will focus almost solely on boosting it even further.”
-Ben Lefebvre, Politico
“I don’t think the level of production in the U.S. is being constrained by external restrictions,” “I’m not sure how ‘drill, baby, drill’ translates into policy.”
-Exxon Mobile CEO, Darren Woods
Supporters Say:
“These and other proposals by the Trump administration will have a massive positive effect on America’s economy, including by helping to further reduce inflation, which has plagued families for most of Biden’s time in office.”
-Justin Haskins, Fox News
3. Tariffs on Foreign Goods
The policies:
Trump has proposed several tariffs on foreign imports including…
- 10%-20% tariff on foreign goods from any country.
- 60%+ tariff on Chinese goods.
- Reciprocal policy that matches tariffs higher than ours to discourage countries from targeting goods being exported from the United States.
Critics Say:
“Economists widely forecast that tariffs of this magnitude would increase prices paid by U.S. shoppers, since importers typically pass along a share of the cost of those higher taxes to consumers. Trump's tariffs would cost the average U.S. household about $2,600 per year, according to an estimate from the Peterson Institute for International Economics.
Some products would likely undergo much more significant price increases than others, experts told ABC News, pointing to items like electronics and toys that rely heavily on imports.”
-Max Zahn, ABC News
Supporters Say:
“A reciprocal trade policy like the one suggested by Trump would dramatically aid U.S. workers, especially manufacturers, by discouraging foreign countries from continuing their unfair trade practices.
Further, the net effect of a such a policy is likely to be fewer tariffs overall, because many foreign producers are dependent on American consumers and would likely choose to eliminate tariffs in order to protect their own manufacturers.
Fair trade policies will help U.S. businesses compete with foreign competitors in a way that hasn’t been possible for decades, creating and protecting American jobs.”
-Justin Haskins, Fox News
Conclusion
No matter what you believe about the future president, having a plan for your investments and retirement is crucial to your own economic success. At 3 Peaks Financial, we build plans for our clients that meet their needs and provide clarity for their future.
Reach out to us today to get started by calling (208) 881-5505, or click “Schedule Appointment” at the top of the page to set up a free consultation with an advisor.
Sources:
https://taxfoundation.org/research/all/federal/donald-trump-tax-plan-2024/
https://www.foxnews.com/opinion/trump-has-plan-economic-prosperity-harris-does-not
https://www.foxnews.com/opinion/3-trump-policies-help-fix-americas-broken-economy
https://www.politico.com/news/2024/11/07/trump-win-pyrrhic-victory-for-oil-industry-00187559
https://www.investopedia.com/trump-economic-proposals-presidential-election-8731809
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
Investing includes risks, including fluctuating prices and loss of principal.
3 Peaks Financial does not provide tax or legal advice. Please consult a tax professional before implementing information or strategies found in this publication.
*Connor Dye is solely an investment advisor representative of 3 Peaks Financial Advisors, and not affiliated with LPL Financial.