Trumponomics: The economics of a second Trump presidency

Continuing our series of analyses on the 2024 election, we modeled the macroeconomic impact of a second Donald Trump presidency. If the former president wins on Election Day, he will most likely return to the White House with Republican majorities in the House of Representatives and Senate. Assuming full Republican control of government after the 2024 election, we constructed two scenarios that bookend a range of outcomes for the US economy. Both would likely push inflation above the baseline.

What you will learn:

• Our first “limited Trump” scenario assumes a Republican-led Congress extends the personal tax cuts under the 2017 tax law and enacts higher spending levels, while the president uses his presidential powers to reduce immigration and impose targeted tariffs on China and the EU. These policy changes raise the level of real GDP 0.6% higher than our baseline in 2027 and add as much as 0.3ppts to the Federal Reserve’s preferred measure of inflation – the core personal consumption expenditure deflator – in late 2027 and early 2028.
• The second “full-blown Trump” scenario assumes Republicans prevent the expiration of the personal tax cuts under the 2017 tax law and cut corporate taxes, and lawmakers agree to even higher spending levels. At the same time, the president curbs immigration to a greater extent and imposes across-the-board tariffs on major trading partners. In this scenario, inflation would be even higher, while the renewed trade wars more than offset the benefit from lower taxes, dragging down the level of real GDP as much as 1.8% lower relative to our baseline. The economy slows to a pace that is well below its potential growth rate.