With President-elect Donald Trump set to take office in about two months, there will be a significant change in the White House's approach on the economy.
The incoming Trump administration has said mass deportations, tariffs, decreasing taxes and cutting regulations are key policy goals for 2025. All of these measures could have a profound impact on the U.S. economy.
Ted Jenkin, president of Exit Stage Left Advisors, questions whether all of Trump's proposals will be approved by Congress, even with a Republican majority in both the House and Senate. Jenkin noted that tax cuts implemented in 2017 by then-President Trump are set to expire. According to the Internal Revenue Service, the TCJA "changed deductions, depreciation, expending, tax credits and other tax items that affect businesses." The TCJA was a policy that Trump often pointed to during his 2024 campaign as he credited it for lowering taxes.
"I think the big thing next year is the Tax Cuts and Jobs Act expires and what will happen to all those tax cuts?" Jenkin said.
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In the days following the election, the stock market saw a major surge. Jenkin said this is tied to the belief among investors that corporate tax rates could fall to 15%, instead of 21%.
"I think corporate tax rates are going to go down but on the other hand, there's a lot of gloom and doom about inflation," he said. "If there's 60% tariffs on imported goods from China, if there's 10% tariffs around the country, what is that going to do to inflation?"
Jenkin also noted that Trump plans to install Vivek Ramaswamy and Elon Musk to oversee efforts to reform the federal workforce. Depending on their actions, there could be a large number of federal employees facing unemployment, which could impact the economy.
What happens to the Federal Reserve under Trump also remains in question. Last week, Chair Jerome Powell said he would not resign to allow Trump to appoint a new Fed chief. Powell was first appointed to the post in 2018 by Trump and reappointed by President Joe Biden in 2022 for another four years.
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Regardless, Jenkin said that the low mortgage rates that were offered during the pandemic amid a period of low government interest rates are likely not going to return.
"The fed still has a mandate to keep inflation low and to keep maximum employment," he said. "So if unemployment skyrockets here or inflation skyrockets and yes, I think you could see mortgage rates come down. Otherwise, 6%.
