After all the debates, rhetoric, and predictions, it’s finally over. In truth, it is just beginning. Donald Trump is projected to win the race and will become the 47th President when he takes office on Jan 20th. There were many issues on the ballot last night and there is always a question around which one was the most important to voters. It appears that the most critical issue this year was the economy and voters felt that Trump’s economic plan was superior to the one Harris laid out. This was the top issue he campaigned on and will likely be his first order of business when he takes office.
There are still votes to be counted and a lot to sort out from the election. It appears that Republicans will regain control of the Senate, yet control of the House remains uncertain. Party alignment between the executive branch and the Senate will be a boon for Trump and things could become even better for him if Republicans win the House as well. With Trump’s strong focus on the economy, we already have an idea about how things will shake out. The dollar is expected to strengthen under Trump and foreign currencies like the euro yuan could weaken due to his proposed increase in tariffs. Trump has repeatedly stated that he will increase tariffs by another 10% when he takes office and there will be some fallout from this move. It could help strengthen the dollar and some American companies will see benefits. On the other hand, it could have a negative impact on our imported goods and disrupt the supply chain. The tariffs will mean that companies could pay higher prices for goods and that increased cost would be passed onto the consumer. During the campaign, Harris referred to this price increase as a national sales tax and Trump refuted that it would result in higher prices for consumers. The tariff increase is an almost certainty at this point and we won’t have to wait long to find out if and by how much the costs of goods go up.
For businesses and consumers, there seems to be some big tax cuts on the way as the second component of Trump’s economic plan will be corporate tax cuts. Trump’s 2017 tax cuts are set to expire in 2025, and he will certainly extend and add to them. He has also proposed a complete overhaul of the tax code. For consumers he has proposed elimination of taxes on tips, overtime pay, and social security benefits. He could also provide exemptions for emergency responders, veterans, and active-duty military. Part of his tax overhaul could also include the elimination of traditional federal income tax and in favor of a system run by tariffs. It has not been made clear what that new system might look like or how it would affect businesses and consumers.
The state of the economy and the cost of goods has been a contentious issue this year. Voters were unhappy with the current state of things and believed that Trump’s policies will do more good than harm. Even though we have seen some market reactions to Trump’s victory, there are still over two months before he takes office. No matter how aggressive his agenda may be, it is not possible to get everything done on the first day. Most of the changes he has proposed will be rolled out over time and it will give businesses and markets a chance to adapt to the change. No President has ever successfully passed every part of their agenda, and we will have to wait and see which parts of the plan Trump finds the most success with.