Taxes, immigration and fiscal policy: Trump’s second term as US president | Donald Trump News

When Donald Trump is sworn in as the 47th president of the United States on January 20 next year, one of the first things economists expect him to do is stop at least some of the taxes he promised during his campaign.

As a candidate, Trump said he would impose tariffs of 10 to 20 percent across the country on imports, and 60 percent on imports from China.

Economists expect him to start with tariffs targeting several countries, including China and other trading partners such as Canada, Mexico and the European Union.

“At the very least he will threaten them with tariffs and if they don’t negotiate the way he wants, Trump will put them in,” Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, told Al Jazeera.

And while he expects “strong tariffs” on imports from China, Hufbauer says there may be exceptions for billionaires who support Trump, including businesses like Elon Musk’s Tesla and TikTok.

“How far the payment goes depends on how willing President Xi is to negotiate with Trump,” he said, referring to Chinese President Xi Jinping.

But it is not only China.

Trump had promised that the European Union would have to “pay a big price” for not buying enough US products. Some of that fear played out in European stock markets on Wednesday. German automakers, including Mercedes-Benz Group and BMW, were among the stocks to feel the fear and lost about 6.5 percent each.

Similarly, Canada, too, is vulnerable to Trump’s tariffs as 75 percent of its exports go to the US. Trump said last month he would renegotiate the existing US-Canada-Mexico deal known as the USMCA and would be “very happy” to do so.

“There will be many disruptions in the world trading system,” Hufbauer warned.

‘Just in time’ monetary policy

Beyond the “biggest trump card” tax, monetary policy will consume a lot of time and energy in Washington, DC next year, said Bernard Yaros, a leading US economist at Oxford Economics.

He says the existing tax cuts will end, the expiring debt ceiling and the annual budget freeze may all come together at the same time.

All of that has to be passed by the US Congress. The Republicans won control of the US Senate and if they remain on track to get a majority in the House of Representatives again – the final result is expected at the end of the week – then Yaros expects the monetary policy measures to be passed in due time.

He also expects Congress to repeal parts of President Joe Biden’s Inflation Reduction Act (IRA) including reimbursing climate spending and tax credits for electric vehicles. But he expects the clean energy tax breaks to remain in place since those went to several Republican-led states.

About a dozen House Republicans are on record supporting IRA bills for investment, and power generation, in renewable resources, as red states have disproportionately benefited from clean energy investment, noted Oxford Economics in a post-election analysis.

‘Inflation and Disruption’

Another issue expected to receive Trump’s immediate attention is immigration.

“Even if Trump starts rounding up people and deporting them, both increase and disrupt and make it difficult for businesses to plan,” said economist Rachel Ziemba, adding that the humanitarian effect of that will have its greatest effect. Some of this was evident in Trump’s first term.

Economists expect US immigration policy to be more restrictive by mid-2025. That is possible by reducing the admission of refugees and restoring the Migrant Protection Agreements, often referred to as the “stay in Mexico” policy.

The latter required asylum seekers to wait in Mexico as their cases proceeded in immigration courts, not in the US, where they would be eligible for a work permit.

Many of those immigrants have contributed to the expansion of the US labor market in recent months. And their removal will see a tightening of the labor market with other disruptive effects including wage and inflation.

Although economists have repeatedly warned in the run-up to the election that President Trump’s presidency will increase inflation, that will only happen once these policies begin, they say.