The smooth economy that Donald Trump was poised to inherit suddenly looks a bit rockier, with critics saying the president-elect is contributing to the uncertainty. The Dow Jones stock index essentially ended Thursday flat after 10 days of losses, and the Federal Reserve sees inflation as staying stubbornly elevated. Trump’s actions to undo a bipartisan budget deal and replace it in under 24 hours have injected more uncertainty into the markets. The Congressional Budget Office warned that Trump’s tariff threats would raise prices and hurt economic growth without raising enough revenues to cover his planned tax cuts.
As Trump prepares for a second term in the White House, his mix of uncertainty and reality TV drama is putting the economy to the test. Despite his promises to launch a large deregulatory agenda, cut taxes, and lower energy costs, the economy is dealing with inflation at 2.7% and public dissatisfaction with President Joe Biden. Turmoil in the markets and the government shutdown looming after Trump’s actions to blow up a budget deal have raised concerns among investors and lawmakers. Trump’s ability to project strength and reduce inflation helped him win the election, but he still faces a skeptical public and a delicate economic situation.
The past few days have been a reminder that the economic growth in Trump’s first term was often accompanied by turmoil. Voters, already exhausted by inflation, may not be ready for another round of blame games and uncertainty. Trump’s social media posts promising to “fight ’till the end” and fund challengers to Republican lawmakers who oppose him have added to the chaos. Democrats are quick to seize on Republican dysfunction, with Rep. Suzan DelBene criticizing Trump’s impact on families. The president-elect is inheriting a higher national debt from Biden, limiting the scope of his planned tax cuts.
Trump’s policies could impact the economy going forward, with the need to increase the government’s borrowing authority while renewing tax cuts and managing the budget deficit. The U.S. economy has a strong underlying growth trend, but policy risks remain a concern. For the Federal Reserve, uncertainty about Trump’s policies adds another layer of complexity to economic forecasts. With possible tariff threats and tax cuts that could add trillions to deficits, the Fed’s chair Jerome Powell emphasized the need to proceed with caution in a time of uncertainty. As Trump prepares to take office, the economy remains a key focus with potential challenges ahead.
