As the second Trump administration prepares to take office, we’re getting a better sense of the policy and tone we could see coming out of Washington over the next four years. For all the details we don’t know, the so-called “red wave” of the 2024 election means there’s some reasonable assumptions we can make about what’s ahead and how it will impact your money and investments.
Let’s walk through some of the key policy ideas floated by “Trump 2.0,” their likelihood of getting implemented, and their potential impact on your personal finances. But, first, to set the stage: the U.S. economy and stock market have historically trended toward growth in the long term regardless of which party is in office. Often, the short-term responses to news (like who wins the election or a policy idea) differ from the long-term impact, and it’s hard to predict the myriad ripple effects of any new legislation.
Trump 2.0: Taxes
Many of the provisions in the Tax Cut and Jobs Act (TCJA) passed during President Trump’s first administration are set to expire at the end of 2025. That’s a scenario we’ve been actively preparing for—the current law allows for a record high estate tax exemption, for example, that we want clients to benefit from.
With Republicans set to control the White House and both branches of Congress starting January 2025, it’s likely we’ll see TCJA extended. While that may seem like a continuation of the status quo, there are a few ideas President Trump floated on the campaign trail that could make waves:
- Removing the $10,000 cap on state and local tax deductions (SALT).
- Tax deductions for interest payments on auto loans.
- Lower corporate tax rates, potentially with some strings attached.
- Exempting certain types of income—tips and Social Security—from income tax.
- Tax credits for family caregivers.
- A repeal of green energy tax credits.
What could happen: With a Republican Congress, it’s likely that President Trump will be able to whip up whatever votes he needs to extend TCJA and potentially make the changes permanent. However, it remains to be seen which, if any, of the ideas floated on the campaign trail could be added to any new tax legislation.
A number of the potential tax incentives (credits, deductions, and lower rates) would mean significantly less revenue for the government. There are still a number of fiscal conservatives in Congress who may not support cutting tax revenue unless the government makes similar cuts to spending to avoid increasing the deficit and national debt.
The conservative-leaning Tax Foundation estimates that, if everything Trump suggested on the campaign trail were to be implemented, it would cut federal tax revenue by $3 trillion over the next decade. The University of Pennsylvania (where Trump studied economics) puts the estimate at $6 trillion over the same period.
What it means for you: Increasing the deficit likely wouldn’t have a major impact on personal finances; however, the side effects might (like if tax cuts are paired with spending cuts). Additionally, a growing deficit could lead to more intense gridlock around the debt ceiling (as we’ve seen in the past), which could impact the bond market and how investors look at Treasurys and the government’s ability to pay its debt.
Tax cuts generally help personal finances—less money paid to Uncle Sam means more money in your pocket. Whether there’s a benefit beyond the original TCJA, or how significant that benefit would be, depends on the details.
Trump 2.0: Tariffs
Tariffs—the tax we charge American companies for importing foreign materials and products—were one of the biggest talking points of the 2024 campaign. In 2016, President Trump implemented tariffs on imported steel and aluminum, as well as goods imported from China. The Biden administration kept many of these tariffs and even extended some of them.
As part of his second term, President Trump vowed to impose blanket 25% tariffs on goods imported from Canada and Mexico, plus an additional 10% tariff on goods from China. Those three countries—Mexico, Canada, and China—are the U.S.’s top trading partners, accounting for more than 40% of our imports.
The incoming administration has signaled that it may refrain from tariffs if trading partners enact policy changes, like making a bigger effort to stop the flow of illegal drugs or immigrants into the U.S. In the past, however, countries have instead retaliated by imposing their own tariffs on U.S. exports. This hit U.S. farmers particularly hard during the first Trump administration, leading to a $16 billion bailout for farmers in 2018.
What could happen: With the administration yet to take office, tariffs seem to be more of a negotiating tactic than anything. However, President Trump made it very clear during his first term that tariffs aren’t just a talking point.
That said, experts and investors seem to view President Trump’s nominee for Treasury Secretary, Scott Bessent, as a sign that tariffs are more of a negotiating tactic and that the U.S. will try to avoid a full-on trade war. As a former hedge fund manager, Bessent is a free market advocate; markets rose in response to his nomination.
Globally, leaders have pushed back on the threat of additional tariffs. Beyond that, we could see opposition from U.S. interest groups who want to avoid a trade war.
What it means for you: Mexican President Claudia Sheinbaum stated, “If tariffs go up, who will it hurt? General Motors.” (GM has numerous production plants in Mexico.) Domestically, companies are working to protect themselves against potential tariffs and holding off on key decisions around suppliers, sales, and marketing. This uncertainty could impact workers at companies with global interests.
Beyond that, we could see prices on consumer products increase. In particular, consumer electronics and appliances, cars, and shoes could see steep price increases as more than 90% of these items are imported either in whole or in part. Similarly, we import some 50% of our produce from Mexico.
For context, the Tax Foundation estimates that tariffs under the first Trump administration translated to a roughly $625 tax increase for U.S. households. The Yale Budget Lab estimates that the tariffs proposed by the second Trump administration could drive prices up 0.75%, which would essentially compound four to five months’ worth of inflation into a very short time period. These scenarios depend on full implementation and don’t take retaliatory tariffs into account.
Trump 2.0: Immigration
President Trump has linked much of his discussion of immigration policy to economics. For instance, he’s said Mexico could avoid potential tariffs by restricting the flow of illegal immigrants into the United States. He’s also proposed mass deportations of anyone currently residing in the U.S. illegally—some 11 million people, based on estimates, many of whom have been here for years and have children with U.S. citizenship.
What could happen: If the second Trump administration does go through with this policy, experts suggest it will be very expensive and present logistical–and potentially legal–challenges. One expert at USC referred to the plan as a “campaign fever dream” since it would require cooperation from migrants’ native countries, significant funding, and increased manpower at U.S. enforcement agencies.
While proponents have suggested the U.S. military could assist with deportations, the Supreme Court has previously ruled that the president can’t simply use the military to enforce immigration law—meaning any legal challenges could be drawn out over many years. In other words, while we could see a renewed, more aggressive focus on deportations, it’s unlikely President Trump (or any administration) will be able to remove 11 million people from the U.S. in four years.
In reality, this may be more of a talking point than anything. President Trump never deported more than 350,000 per year in his first term, significantly less than the 432,000 deportations by the Obama administration in 2013 despite the former being a far more vocal critic of immigration.
What it means for you: If a full-scale deportation were to happen, the economic consequences could be severe, particularly in industries that rely on undocumented workers for labor. According to Pew Research, the industries with the highest share of unauthorized workers include agriculture, construction, and hospitality followed by business services and manufacturing.
In general, this type of labor shortage would lead to higher prices, as companies may need to spend more money to recruit workers—a cost they generally pass on to consumers. However, the shock of a sudden decrease in workers (versus a more gradual reduction) could be more intense. Given the logistical challenges of such a deportation, however, this seems unlikely.
One possible side effect to consider? Undocumented workers may head to so-called sanctuary cities in anticipation of a crackdown, which could have domino effects that are hard to predict.
Trump 2.0: The Fed and the SEC
On the campaign trail, President Trump didn’t hold back criticizing the Federal Reserve and government regulators. While Fed Chairman Jerome Powell was appointed by President Trump during his first term, the president pressured Powell to change his policy on rates as early as 2019, breaking from precedent around an independent Fed.
This time around, President Trump has gone beyond criticizing Powell. Many of his supporters have called for the Fed to be eliminated and/or for the country to return to the gold standard.
When it comes to investing, President Trump tapped former commissioner Paul Atkins to once again head the Securities and Exchange Commission. Atkins vocally diverges from outgoing SEC chair Gary Gensler on several issues, but the most notable may be cryptocurrency. Atkins is considered an advocate.
Perhaps more significantly, however, is how the SEC under Atkins will regulate the investment industry overall, including how investment advisors make recommendations and how they’re paid. Following the Financial Crisis, regulators implemented new procedures that took roughly a decade to iron out (they were finalized in 2018) and even longer to implement (they took effect in 2022).
What could happen: Some of the policies floated by the Trump campaign, such as eliminating the Fed or a return to the gold standard, are unlikely. Doing so could jeopardize the dollar’s standing as a global reserve currency, which could destabilize the U.S. economy. Trump’s appointments at the Treasury Department, which works closely with the Federal Reserve on implementing monetary policy, suggest that he’s unlikely to venture into that type of uncharted territory.
When it comes to regulations of investments, whether it’s investment advice or products like cryptocurrency, we could see changes. Regulators have a certain amount of discretion when it comes to writing, interpreting, and implementing rules.
What it means for you: When it comes to monetary policy, we’re likely to see tension between the White House and the Federal Reserve and could see a shift in 2026 when Powell steps down. Until then, don’t expect material changes in how the Fed approaches rates or the economy.
Any changes on the regulatory side would need to be evaluated on a case-by-case basis.
Wildcards
One of the biggest tenants in investing is: Past performance doesn’t predict future results. It’s nearly impossible to say exactly what will happen in the second Trump term, despite what we know from his first four years in office.
Beyond that, there are a number of wildcards at play. For instance, health care costs have continued skyrocketing, and while President Trump vowed to address this on the campaign trail, he did not introduce specifics.
We could also see proposed cuts to government agencies and spending, potentially with input from business moguls like Elon Musk. It remains to be seen how these popular ideas might translate into more practical policy initiatives, but spending cuts could affect everything from how efficient the IRS is at processing refunds to reduced subsidies and job cuts.
At the end of the day, this type of uncertainty mirrors market uncertainty, and it’s why we take a long-term, goals-based approach to financial planning with our clients. At Quorum, our team monitors policy in order to help our clients proactively respond to any changes that could impact their goals. Beyond that, we suggest you treat political headlines like investment headlines—it doesn’t hurt to be aware of them, but when it comes to your finances, it’s better to take a personal, long-term approach and ignore the noise.
