Like it or not, the votes are in and Former President Donald Trump will have a second term as the 47th U.S. president. Not since 1893 with the re-election of Grover Cleveland has any former president served two non-consecutive terms.
Throughout the election, approximately 31 percent of voters cited the economy as their top issue. Given the high inflation and trends towards unaffordable housing, many are hoping that a change at the top of the government will inspire new opportunities and change for the better.
While no one can say for sure what the next four years hold, we do have some indication based on campaign promises and other commentary. Here’s what a second Trump presidency could look like for your personal finances.
Inflation and Tariffs
Inflation was and continues to be a major concern for many American families. Since February 2020, consumer prices have increased 21.4 percent – remarkably high for a four-year period.
Although the Federal Reserve has taken steps to calm inflation and brought it back down to a modest 2 to 3% year-over-year change, there is the possibility that it could reignite under the Trump administration due to tariffs.
Trump has often been quoted as saying the term tariff is”the most beautiful word in the dictionary.” His goal with tariffs is to discourage the importing of foreign goods and motivate companies to bring manufacturing jobs back to the U.S. While that could potentially happen over the long term, the more immediate impact would be an increase in prices for all products across the board.
To understand why, you have to think about the way tariffs work. In general, if you force a foreign country to pay a fee for selling goods in your country, then the manufacturers of those goods will react by raising their prices. These high prices then get passed on to American consumers who need or want these items.
According to Mark Zandi, the chief economist at Moody’s, tariffs “will act as a massive tax increase on American families as they pay more for all imports, cutting into their purchasing power and thus weighing heavily on their spending and the overall economy.”
Regardless of the warnings, Trump has already made headlines by threatening Canada and Mexico with a 25% across-the-board tariff on all goods. This is unless the countries can take stronger measures to control the flow of illegal drugs (like fentanyl) and illegal migrants across the border.
Taxes
One of the more memorable outcomes of the first Trump presidency was the Tax Cuts and Jobs Act (TCJA). This was a sweeping tax law he signed back in 2017 which reduced the amount owed by all working Americans as well as corporate businesses.
These tax brackets have not changed – even during the Biden administration. However, as part of the TCJA, they are scheduled to expire by the end of 2025. As you can guess, Trump plans to extend these tax cuts and has even vowed to make them permanent.
Though lower taxes sound like a good idea for most people, there is some debate about “who” will benefit the most from these reforms. According to the Institute on Taxation and Economic Policy, in 2026:
- The richest 1 percent would receive an average tax cut of about $36,300
- The next richest 4 percent would receive an average tax cut of about $7,200.
- All other groups would see a tax increase with the hike on the middle 20 percent at about $1,500 and the increase on the lowest-income 20 percent of Americans at about $800.
Of course, this is all just speculation. Passing the TCJA for a second time would still have to clear Congress, and there are often changes before any bills get finalized.
Child Tax Credit
Another major talking point on the campaign trail was the child tax credit. It’s currently $2,000 for every qualifying child under the age of 17. Many American families rely on this credit to reduce or possibly eliminate their tax bill altogether.
Thankfully, Trump has no plans to cut this benefit. In fact, he doubled the amount during his first administration and has hinted that he may increase it yet again, though no specifics have been communicated.
The soon-to-be vice president JD Vance raised the possibility of increasing the child tax credit to $5,000 in an interview on CBS’ Face the Nation. However, that statement was met with skepticism by some Republicans who are leery to see it raised by that much.
Housing
On the subject of housing, Trump has not laid out a specific plan. The Republican platform his campaign website linked to promoted “homeownership through tax incentives and support for first-time buyers.”
The real estate market operates by the laws of supply and demand. In recent years, mortgage interest rates have risen to the point where it’s very disadvantageous to move to a new house. That has resulted in a shortage of supply and caused the prices of existing homes to skyrocket – spiraling it towards becoming even more unaffordable.
Trump has said that he would like to return interest rates to the low levels they were during his first term, and this would help get the gears of home buying turning again. However, mortgage rates aren’t dictated by the government.
They instead tend to mirror the yield of 10-year Treasury bonds which are heavily influenced by the Federal Reserve – an agency that operates outside of the control of the president. Since the mandate of the Fed is to ensure maximum employment and price stability, they will most likely continue to make adjustments to interest rates that align with these broader goals rather than for the sake of housing alone.
Social Security
Finally, if you or someone you know relies on Social Security or Medicare, then you were probably relieved to hear that Trump has no plans to cut benefits to either of these programs. In fact, Trump has often said that he wants to eliminate the taxes that are collected on Social Security income.
While this gesture sounds noble, it’s important to point out that many Social Security recipients already pay nothing for their benefits. Americans whose taxable income is less than $32,000 aren’t required to pay taxes while those between $32,000 and $60,000 annually would only shave approximately $90 off their tax bill.
Furthermore, Social Security is already expected to become insolvent by 2034, and changes to the tax codes could speed this up even further. According to the nonpartisan Committee for a Responsible Federal Budget, exempting taxes on benefits would result in Social Security and Medicare receiving $1.6 trillion less in revenue between 2026 and 2035, causing Social Security to become insolvent in 2032, followed by Medicare in 2030—one and six years sooner than currently projected, respectively.
This is assuming, of course, that additional funding doesn’t come from somewhere else to bring the programs back to equilibrium. Again, we’ll have to wait and see if any of these proposals actually come to fruition.
The Bottom Line
A second Trump presidency could mean several things for your everyday purchases and taxes. However, the bulk of these changes won’t be realized until the President-Elect takes office and starts pushing his agenda.
Every new presidency brings about uncertainty and opportunity. However, these are forces that are largely out of your control. All you can do as an individual is to focus on the things that are within your circle of influence. This generally means maintaining a good budget, saving for long-term goals, and working towards the financial security of your loved ones.
Featured image credit: Wikipedia
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