Joe Biden and Kamala Harris struggled to convince voters that the economy was strong. With Donald Trump now poised to return to the White House, the market is thriving, and growth is steady, which positions him to take advantage of the political benefits.
Despite the lingering impact of the highest inflation rates in four decades on consumer confidence, Trump capitalized on the pessimism, claiming that the economy was in freefall during his campaign. Now, with the election behind him, convincing the public that the economy is in good shape may prove much easier for him.
Joseph LaVorgna, former chief economist for Trump’s National Economic Council, believes Trump’s branding skills are critical to his success. “He’s extraordinarily effective and more confident, and confidence is key,” LaVorgna said.
Despite Trump’s optimistic outlook, economists forecast slower growth ahead, raising doubts about the sustainability of his economic agenda
While the U.S. economy has remained a bright spot globally, Democrats failed to leverage domestic economic growth to gain political traction. Inflation has been dropping for over two years, gas prices are down, and grocery price hikes have slowed to under 2 percent, yet Bidenomics and Harris’ vision for an “opportunity economy” failed to resonate with voters.
Trump’s influence has kept the economy a political liability for the Democrats. He criticized the administration for turning a “perfect economy” into an “economic catastrophe.” Meanwhile, economic indicators have remained strong, with the stock market reaching new highs and the economy growing at a robust 2.7 percent in the third quarter. Despite recent labor market fluctuations, the unemployment rate has dropped well below where it was when Trump left office.
Incoming presidents rarely inherit such favorable economic conditions. Trump will need to convince the public that the current growth trajectory is due to his return. His allies on Wall Street, many poised for roles in his administration, have been vocal about the market’s surge post-election. Trump himself has claimed the market’s rise earlier this year was linked to his polling surge.
However, these economic advantages are not guaranteed to last once Trump assumes office. Jason Furman, a Harvard economist and former Obama adviser, suggests that even if Trump implements policies perfectly, the growth seen in recent quarters is unlikely to continue.
The International Monetary Fund predicts U.S. growth will slow to 2.2 percent next year, with tighter fiscal policies and a cooling labor market contributing to the decline. Dana Peterson of the Conference Board forecasts an even weaker 1.7 percent growth rate, far from the 3 percent target Trump and his advisers seek.
Trump’s policies, such as universal tariffs on imports and deporting millions of undocumented immigrants, could further dampen the economy. Economic think tanks and Wall Street analysts predict that these moves could slow GDP growth by 0.5 percent to 3.6 percent. Similarly, extending the 2017 tax cuts and implementing new ones could add trillions to the federal deficit, raising interest rates and making borrowing more expensive for consumers and businesses.
The success of these proposals will depend on Trump’s ability to enact them. Although many economists are skeptical of his plans, some, like former U.S. Trade Representative Robert Lighthizer, argue that economic models often fail to predict real-world outcomes accurately.
Trump’s allies on Wall Street are vocal about the post-election market surge, but experts predict a slowdown in U.S. growth in 2025
Without Biden and Harris to compete against, Trump might focus on the popular policies he enacted during his first term, such as tax cuts. Many provisions from the 2017 tax reform, including the higher standard deduction and lower rates for most income groups, will expire in 2025. The debate in Congress over these tax changes will give Trump the opportunity to advocate for their continuation.
“President Trump can take credit for the strong recovery from Covid due to his tax reforms,” said Kevin Brady, former Republican chair of the House Ways and Means Committee. Brady attributed inflation to Biden’s policies, arguing that tax reforms played a remarkable role in the current economic strength.
However, Trump will find that blaming the current administration for any economic difficulties he encounters in his second term may only go so far. As Biden administration officials know, favorable economic forecasts won’t matter if the public feels insecure about their finances.
Slowing growth or rising inflation could make it harder for Trump to make his case to voters. Hal Lambert, an investor and Republican donor, notes that no amount of political messaging can change people’s everyday experiences if they feel the pinch at the grocery store or in restaurants.
Given how partisan sentiment affects economic perceptions, Trump’s economic message may not sway many voters, particularly those who are more optimistic about the economy under Democratic leadership. Surveys from the University of Michigan and Morning Consult show a reversal in sentiment among voters, with Republican optimism rising after Trump’s return to the White House.
LaVorgna pointed out that during Trump’s first term, small business sentiment, as measured by the National Federation of Independent Business, soared. This could be a reflection of Trump’s psychological impact on public confidence in the economy.
The recent performance of the stock market has also been influenced by this sense of optimism. While Trump may take credit for this, it is just one measure of his economic agenda’s success. Scott Bessent, a hedge fund executive and Trump adviser, reminds us that asset prices alone don’t define long-term success. “The ultimate measuring stick is long-term economic performance,” he said.
