Explainer: Key Economic Policies of Donald Trump

On January 20, 2025, President-elect Donald Trump will officially take office after winning the 2024 presidential election. This calls for a closer look at the key policies expected to be implemented by the Republican president upon assuming power.

Trump’s policies primarily focus on imposing more protectionist measures, including tariffs on American imports and extending tax exemptions set to expire in 2025. This report highlights the potential outcomes of these policies and their impact on the US and global economies and financial markets.

Tax Exemptions

President-elect Donald Trump’s economic policies aim to maintain the economic reforms successfully passed by the previous administration in 2017 during his first term. Additionally, two other proposals target attracting a large number of voters: tax exemptions and social security payments.

Trump’s policies also include proposals for new tariffs, making the new Trump administration—if he wins the election—very similar to his previous administration that governed the country.

Returning to the economic reforms Trump introduced in 2017 is likely not just a boast of past success but could also have significant practical implications. Without the upcoming US Congress passing decisions to adopt and pass more of these reforms into law, they will end up as proposed legal texts with no impact on what the law stipulates for 2025, including the cessation of tax exemptions and the reduction of government spending.

If this happens—failure to pass a law extending these measures—the country may witness new tax increases of up to 20% on most Americans. Different tax brackets may also see increases. Standard tax exemptions for all low-income Americans could be significantly reduced.

The minimum tax threshold may decrease with a significant rise in corporate tax rates, and current tax exemptions could be eliminated. Companies currently benefiting from substantial exemptions for research, development, and real estate investment may lose these benefits.
All this could happen if the former president fails to prevent the passage of laws that would change the mentioned tax brackets. However, if Trump takes control, he is expected to maintain the tax benefits provided by the legislation passed during his term.

Trump’s administration is also expected to adopt more reforms as an extension of the previous reforms that have already become US law. Trump’s administration is also expected to further reduce the corporate tax rate from the current 21% to 15%, making the United States one of the countries with the lowest corporate taxes in the world.

Tariffs

Logically, if corporate tax cuts are approved, more social security payment exemptions from taxes should be approved. Trump promised at an election conference to raise the current $10,000 cap on the amount of local tax that an individual can deduct from their federal taxable income. This would eliminate one aspect of the 2017 reform package, but Trump and his named vice president, J.D. Vance, did not mention this promise again, and it did not appear in any campaign materials.

Trump’s team also promised to impose broad tariffs of 20% on all imports and up to 60% on Chinese products entering the country. These figures seem large, and they are, but there are currently tariffs close to these rates in effect. The Biden administration maintained all the tariffs imposed by the White House during Trump’s term in 2018 and 2019 and added more. The US already imposes a 25% tariff on steel and aluminum imports, a 50% tariff on semiconductor imports, and a 100% tariff on Chinese electric cars and their parts. These are just a few of the many Chinese goods subject to US tariffs.

Considering the potential impact of these proposed policies on the budget, it should be noted that tariff revenues cannot compensate for the revenue shortfall due to the proposed tax cuts. Since most of Trump’s tax cut proposals aim to maintain the laws passed during his previous term, the budget impact should be viewed from a different perspective.

The real benefit of Trump’s economic promises, if they become enacted policies, may be to prevent a 20% tax increase, creating a better climate for growth.