A Strong Economic Hand for Trump
When Barack Obama assumed office in 2009, the economy was in turmoil—unemployment soared, markets plunged, and families faced housing crises. In contrast, Donald Trump enters his second term with a much stronger economic foundation.
As of late 2024, the unemployment rate stood at a historic low of 4.1%, a level surpassed only by George W. Bush in 2001 and Richard Nixon in 1969. Despite concerns over rising living costs and potential inflation risks, the U.S. economy is currently experiencing robust job growth, wage increases, and overall economic resilience.
David Kelly, chief global strategist at JPMorgan Asset Management, noted: “The president is inheriting a very healthy economy.”
Economic Uncertainty Under Trump’s Agenda
While leadership transitions often bring uncertainty, Trump’s sweeping initiatives introduce significant unpredictability. On his first day back in office, Trump enacted executive actions on energy, immigration, and federal operations, signaling an aggressive policy agenda.
Trump has pledged to:
- Impose massive tariffs on trading partners.
- Cut red tape for businesses.
- Introduce new tax breaks for individuals and companies.
Yet, economic experts caution that unpredictability can hinder growth.
“Uncertainty acts as a tax on the economy,” said Kelly. “It slows decision-making, which impacts progress.”
Trade Tariffs: Questions Remain
Trump’s promise to overhaul trade policies has sparked debate. He announced plans for 25% tariffs on Canada and Mexico starting February 1, but no official executive action has been signed. Additional tariffs targeting other countries remain undefined, leaving businesses and economists in limbo.
Key concerns include:
- How high will tariffs go?
- How long will they last?
- Will trading partners retaliate?
Although Trump emphasized tariffs as a way to protect American workers, economists warn that tariffs often lead to higher costs for U.S. consumers, as importers pass expenses down through price hikes.
Tackling the Cost of Living
The rising cost of living remains a significant challenge for Americans. On average, households now spend an extra $1,213 monthly compared to January 2021, according to Moody’s Analytics.
While wages have grown slightly faster than prices, many Americans are struggling to keep up. Trump has vowed to lower prices, but economists remain skeptical.
“You can’t return prices to pre-pandemic levels without triggering a depression,” said Kelly.
Higher tariffs and labor shortages caused by potential mass deportations could further increase costs in industries like agriculture and construction, potentially fueling inflation.
Is the Economy Overheating?
Despite these challenges, the U.S. economy enters 2025 on solid ground. The inflation rate has declined but remains above the Federal Reserve’s target. Stock markets are thriving, driven by growth in Big Tech and AI investments.
Torsten Slok, chief economist at Apollo Global Management, expressed concerns about potential overheating:
“We continue to worry about upside risks to growth and inflation.”
The Key to Trump’s Economic Success
Instead of focusing solely on lowering prices, Trump’s economic success may hinge on sustaining real wage growth, which began under Joe Biden. If wages continue to outpace inflation, more Americans will feel financially secure, despite higher costs of living.
As Trump navigates these complex economic challenges, the balance between bold actions and careful management will determine the long-term health of the U.S. economy.