Everything to Know About Donald Trump’s Economic Policies

Tax cuts, tariffs, and increase gas and oil production. Learn more about these policies and how they may affect you.

What a dramatic and intense last couple of months it has been…

Election results are out and Donald Trump has been elected as the 47th president of the United States. Whether or not you are a supporter of Trump, it is nonetheless important to examine his economic policies to better understand the implications they might have on you.

We will take a look at the economic policies that Donald Trump has been preaching in his presidential campaign leading up to the 2024 elections. These policies can be broadly categorized into 3 segments; increase tariffs, lower taxes, and increase gas and oil production.

Tariffs

Let’s first examine Donald Trump’s policies surrounding tariffs. Trump has proposed a flat tariff on all imports around the world of 10% or 20%, with selected tariffs of up to 60%. The objective of these tariffs is to boost domestic production, decrease trade deficit, and increase jobs in the United States.

Image credit of Brunswick Group

By increasing tariffs, imported goods will become pricier. Companies based overseas will be incentivized to relocate to the US to avoid tariffs or lose a potentially large segment of their customers due to higher prices. With more companies setting up factories and plants in the US, there will be an increase in jobs and employment for citizens. The new tariff policies will also increase government revenue which can counter the deficits produced by another major policy proposed by Trump and his administration: tax cuts.

At least that’s what Trump hopes will happen. Many economists, however, have a much more pessimistic view on the likely outcome of this policy. With tariffs increasing the cost of imported goods, some of which cannot be locally produced in the US with the same degree of efficiency, economists posit that these price increases will be passed onto consumers. Thus, the increase in jobs and employment comes at a hefty cost to all US citizens, who already face accelerating cost of living owing to high inflation in the prior years. Moreover, there is a possibility that some businesses may choose to find new customers in other areas of the world instead of relocating to the US, making the US more and more isolated.

The overall outcome of Trump’s tariff policies remains uncertain. Depending on how Trump structures his tariff policy and navigates diplomatic relationships with the rest of the world, this policy could either make America great again or be its worst nightmare.

Taxes

The second key pillar of Trump’s policies is lowering taxes. Trump has stated that he wishes to extend the ‘Tax Cut & Jobs Act’ (TCJA) which is set to expire in 2025. Under this scheme, corporate tax rates and personal income taxes have been lowered while the tax base has been broadened. Under this scheme, the corporate tax rates have been dropped from 35% to 21%, and Trump has stated that he has plans to lower tax rates to 15% for companies that produce their products locally in the US.

Image credit of Forbes

For a full list of Trump’s proposed tax policy, see the list below:

• Making the individual TCJA expirations permanent except for the cap on SALT (effective January 1, 2026)

• Rates and brackets

• Standard deduction

• Personal exemption

• Child tax credit and other dependent tax credit

• Limitations on itemized deductions (excluding SALT) and elimination of Pease limitation

• AMT changes

• Section 199A pass-through deduction and noncorporate loss limitation

  
  

Making the TCJA estate tax changes permanent (effective January 1, 2026)

Restoring the TCJA business tax provisions (effective January 1, 2026)

• 100 percent bonus depreciation

• R&D expensing

• EBITDA-based interest limitation

Reinstituting the domestic production activities deduction (DPAD) at 28.5 percent to lower the effective corporate tax rate for domestic production to 15 percent

Exempting tips from income taxes

Exempting Social Security benefits from income taxes

Exempting overtime pay from income taxes

Creating an itemized deduction for auto loan interest

Eliminating the green energy subsidies in the Inflation Reduction Act (IRA)

Raising current Section 301 tariffs on China to 60 percent

Imposing a universal tariff on all US imports of 20 percent

Foreign retaliation of 10 percent on all US exports plus additional in-kind tariffs on US exports to China

Now that we have understood Trump’s tax policies, let’s try to examine the economic impact they will have on the US economy.

Tax cuts will reduce the government budget. It is estimated that these proposed tax cuts could cost the federal government up to 8 trillion dollars over the next 10 years (although a more realistic figure is around 5–7 trillion). This would be partly offset by repealing the IRA green energy credits, which would contribute 1 trillion, and Trump’s tariff scheme, which would bring in an estimated 4 trillion over the next 10 years.

These policies will mostly benefit business owners and high-income earners, both of whom will see a dramatic decrease in their effective tax rates. On top of that, businesses benefit from lesser competition as imported goods will be relatively more expensive. It might, however, be wise for businesses to begin strengthening their local supply chains to brace for potential increases in prices of raw materials that could jack up their cost and reduce their margin.

Increase gas and oil production

The last of Trump’s major economic policies is to increase gas and oil production. During his presidential campaign, Trump has repeatedly blamed Biden’s administration for high inflation and rising cost of living in the past 4 years. Although it might be a stretch to attribute all of the increase in prices to Biden’s poor oversight, it is true that the prices of everyday goods have shot up during his presidential run. Since 2020, real wages have barely budged, while the cost of groceries has increased 25%, auto insurance 33%, and rents 20%. It is fair to say that the dissatisfaction about how the US economy has fared these past few years played an important role in this November election results. Of course, this begs the question: Will trump perform any better? And if so, how?

Trump has repeatedly said that he will bring down the cost of living and revive the American economy, but how he intends on doing so has been a little more unclear.

His main proposal is to increase local oil and gas production. How? In Trump’s own words, he is going to ‘drill, baby, drill’. The US is not alone in this, energy resilience has become an important government agenda for many countries around the world. The Russian-Ukraine war has caused one of the largest energy price spikes. Countries that relied on Russia for energy have seen a tremendous increase in the cost of living as energy prices skyrocketed. Given how interwoven and crucial energy is for almost all industries, decreasing the cost of energy will bring down the cost of almost all goods in the economy, thereby decreasing the cost of living.

Image credit of Energy Capital & Power

However, there are a few issues with Trump’s energy plans. For starters, oil and gas is an industry known for increasing production only when higher oil prices call for it. These energy companies seek not only to grow but also to placate investors through dividends and returns on investment. Current production levels are already at record highs; tariffs imposed could cause demand for US energy to fall, further reducing incentives to increase production as this would only serve to drive down price and profit.

Given how little we know about Trump’s plan regarding energy, it is not possible to accurately predict whether Trump is going to be successful in bringing down the cost of living through increasing oil and gas production. Ultimately, it will come down to Trump’s ability to convince energy companies to increase production to lower the cost of energy.

It is also important to note that while Trump has said he will implement these policies during his presidential campaign run, whether or not he will follow through with them and succeed in passing these policies is another question entirely. In his 2016 presidential term, we have seen him retract a number of his initial policies including his plan to build a wall to prevent illegal immigration from Mexico.