President-elect Donald Trump has reaffirmed numerous economic commitments in the weeks following his election victory; however, as he approaches 2025, he will encounter significant global competitors who may have alternative strategies.
Trump is the one claiming a mandate for himself, and he is cementing plans for an ambitious economic agenda despite the doubts that have begun to arise about how such exogenous factors would interfere and just how realistic these priorities really were.
On at least one issue, Trump appears ready to moderate his rhetoric. He told reporters earlier this month, "We've seen some progress" on the war in Ukraine, adding, "It's a tough issue." That more measured tone is a departure from months of Trump promising on the campaign trail that he could end the war quickly, even before he would take office.
On many issues, the president-elect is continuing to stake out tough positions, but in the real world, he will find the challenges are considerably more complex than his campaign rhetoric let on.
With broad tariff proposals being unveiled for President Trump, leaders around the globe and policymakers in Washington have been working their way to find ways to neuter his ambitions, especially a blanket tariff across the globe.
The US government bondholders and fiscal conservatives may not look upon Trump's tax reduction proposals quite so favourably since this would tend to increase government deficits rather substantially. Thirdly, the pledge of oil companies to heed Trump's energy production ambition is still left uncertain as well. Of course, another important concern for this year is whether Trump will have his way over these issues or if external forces will force him eventually to back down.
Can Trump Overcome America's $36 Trillion Debt?
All these mentioned key points in Trump's economic plan do face one grand challenge, which is also the snowballing U.S. national debt presently valued well in excess of $36 trillion dollars. Budget analysts have latched on to this huge figure as a reason that any new legislation must now be fully funded. Fully funding new legislation is decidedly much easier said than done particularly when it comes to a tax policy.
Trump has promised a slew of tax cuts, including proposed cuts to both individual and corporate rates. Just this week he said he will deliver "the largest Tax Cuts in the History of our Country."
There's very little information, but the best available estimate suggested Trump's promises over ten years might add more than $9 trillion to the federal red ink. It remains open how quick, or if the national debt ever would reach such a stage that it is going to be an urgent issue for him. Some analysts believe it can go higher without impacting the bond market too much directly, while others argue solid economic growth will keep it at manageable levels.
To some, however, that may be the very issue that makes Trump's second campaign very different from his first.
Trump may not have the opportunity to pursue his intended agenda," Chris Whalen, chairman of Whalen Global Advisors told Capitol Gains podcast recently.
But for many others, this could be precisely why Trump's second campaign will be so different from his first.
"Trump may not have the opportunity to pursue his intended agenda," said Chris Whalen, chairman of Whalen Global Advisors, during a recent appearance on An Capitol Gains podcast.
He said that managing the huge debt alone is already a big problem that may spiral out of control and become apparent to the entire world.
Political dynamics also block the way, with even members of Trump's party questioning his proposals. It was that tension exposed in the recent fight over a possible government shutdown, where Trump urged to eliminate one of the few constraints on government borrowing, the debt ceiling.
Threateningly, opposition showed up in an extraordinary demonstration when thirty-eight House Republicans voted against their president-elect's position, which could be an omen of more resistances to debt-related measures in 2025.
Potential Expenses of Trump's Tax Proposals
The Perspectives of Global Power Players
Debt is a concern as he leans on alternative tactics in the way of offsets from proposed new spending, using a new source of revenue frequently pointing to tariffs and drilling on oil. He used tariffs and oil drilling among measures that will cut through "a tremendous amount of debt."
Legislators have also explored the issue on utilizing potential savings for tax legislation that could be freed-up from Elon Musk non-governmental Department of Government Efficiency to help offset proposed new spending.
But externals may not play ball again.
When it comes to tariffs, too, Trump regularly makes highly exaggerated claims about the possible revenues from import tariffs. Academic evidence suggests that retaliation, as when China last year withheld imports of US agricultural goods, can easily mean losses for the US Treasury in some areas that offset revenues accumulated from the tariffs themselves.
When it comes to oil, Trump often speaks of the phenomenal reserves beneath American soil. But already the United States is pumping a record amount of oil, at prices that have remained - and are likely to remain for the foreseeable future - comparatively low. Oil companies are usually cautious of an oversupply, so may refrain from significant increases in production, however easy it is to do so.
The Impact of Lower Gas and Oil Prices on Consumers
CIBC Private Wealth US senior energy trader Rebecca Babin has said recently that, with only some federal lands opening up, even with a reduction of some friction costs in permitting, economic considerations will eventually become the driver in the sector. Trump, though insists that his plan for the industry will not only raise billions for the Treasury but drastically bring down the prices of energies. Babin added that it would be "a grave concern" if energy prices were halved because something very fundamental would have gone wrong. As Trump sets to play in this complex chess in 2025, how much he yields to or can apply his influence within these contexts could be pivotal to the promises of the next four years for him and how he claims that he would "restore our nation to full prosperity."
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