On January 20, at noon, the second Donald Trump administration will begin. The election run that Trump has been moving continuously since he lost to Joe Biden in 2020 seems to indicate that we will be dealing with a better organized replay of the first term. His squad will focus again on taxation cuts (to stimulate the economy), customs increases (to redesign US trade relations with the world) and deportation of as many immigrants as possible (to increase the chances of American workers). But times have changed, and there's no way that reality can live up to rhetoric.
When Trump first included the presidency in 2016, the United States experienced an extended period of low inflation. The national Reserve maintained interest rates for almost all the time in its office at close zero level. This time, however, the situation is different. Inflation launched upwards during the COVID-19 pandemic, and Fed continues to avoid rising prices again – so interest rates are inactive comparatively high. taxation cuts proposed by Trump mean economical stimulation with low unemployment. All signs of overheating of the economy will meet with a tightening of monetary policy.
Trump sent signals about the request to exchange Fed leadership, but by firing president Jerome Powell, he would hazard higher interest rates in the long word and greater inflation. Taxes in 2025 will most likely be reduced – mainly for the wealthiest, and the resulting failure of gross to the budget in the long word will weaken the fiscal stableness of the country. Due to larger deficits, interest rates will stay higher than if the budget gap was smaller, while the dollar could be strengthened, which will lead to difficulties for US exporters and countries that have taken loans in dollars.
As far as customs are concerned, planet leaders (and financial markets) have already realized that Trump – unlike Roosevelt, who recommended "to talk softly and to hold a thick stick behind his back" – speaks loudly and has a alternatively weak baton. No uncertainty he'll bring in any large sound radically advanced duties, But the American business will immediately start searching for different gates and lobbying for peculiar exceptions. abroad leaders will set off for Mar-a-Lago to play golf and negociate common concessions ("we will not impose duties on your bourbon if you lift the import charges of our cognac and buy anti-aircraft defence systems produced in the US").
Trump may stay deaf to all these requests and supplications and insist on imposing prohibitive duties on all imported products. This, however, will trigger retaliation from trading partners and even more severe protests by the companies that support him today.
He is most not smiling at the script in which he would origin occupation losses in the country – and this could happen if American companies had to pay more for import products and exporters lost their competitiveness in abroad markets. Leaders of countries subject to severe duties will be able to deal with Trump – unless they halt emphasizing how many jobs their companies make in the US, and they will not beat him at golf.
With respect to illegal immigration, Trump will surely change. Its "border wall" is simply a fiction for which there is no real meaning. However, the President-elect is already threatening Mexico and another countries (even Canada!) that if they do not halt migrants on their side, they will punish them with higher duties – and this will have any real consequences.
Trump can besides be clever adequate to ease US sanctions against Venezuela, put more oil into global markets and support Venezuela's economy. In this way, the force on emigration felt by the Venezuelans, while Iran and Russia would be in a more hard situation – both countries without oil sales cannot finance the purchases of Chinese electronic components they request to build weapons.
Trump could go further by organizing grabs and deportations of millions of people residing illegally in the United States. However, mass deportations would harm key sectors of the economy (especially agriculture and construction), make immense social unrest and origin its business allies to reduce their investments (and thus make jobs). In this area we can anticipate political appearances and sensational headlines, but the reality will not change significantly. Meanwhile, illegal immigration into the US It's already gone..
So what's Trump truly gonna do? Is buy Greenland (or Canada!), will take control of the Panama Canal, or limit US support to NATO? no of his fresh announcements and threats are meaningless, but they should not be taken literally. In these cases Trump will besides prosecute what he considers to be a "better deal" for the US (and what he can present). If it does not uncover for now what precisely this better deal would be, it means only that it is open to suggestions – or that any consequence called strategical victory.
This was the case during Trump's first word erstwhile the NAFTA Treaty (North American Free Trade Agreement) was renegotiated with Mexico and Canada. Trump initially threatened to break this agreement “on the first day of office”. In the end, he agreed to insignificant modifications, including changes to the rules on the origin of goods, which were acceptable to all parties, and rebranding, i.e. the transformation of NAFTA into USMCA (United States-Mexico-Canada Agreement).
There is indeed a large redecoration in the world, but it has nothing to do with Trump’s fresh team, which will most likely not be able to respond effectively to them either. Trump continues to usage aggressive language erstwhile talking about confronting China and Iran, but both countries are already in a mediocre economical situation and are not even threatening regional order, let alone global peace. Besides, as in the first term, Trump announces a withdrawal from abroad intervention – it was erstwhile about Afghanistan and Iraq, present about Ukraine. However, Vladimir Putin has already full submitted to China due to the fact that he needs drones and rockets to fire on Ukraine. Do Trump and Republican-dominated legislature truly want to hand a weakened president Xi Jinping an illegal and bloody triumph Ukraine?
What truly interests American voters is good jobs and surviving costs. Trump's "Populistic" program – a smokescreen supported by threatening non-existent enemies – is, however, the chronicle of the foretold defeat.
Trump takes over the country with a strong economy, but his most distinctive programme announcements will almost surely not benefit little educated workers or improve the lives of most another Americans. It will be different: the rich will get rich, the wealthiest Really? they will greatly increase their fortune, and everyone else will most likely face higher inflation, cuts in public service spending and the effects of chaotic deregulation.
**
Simon Johnson – erstwhile chief economist of the global Monetary Fund, lecturer at MIT Sloan School of Management. Together with Daron Acemoğlu and James A. Robinson, he received the Alfred Nobel Prize of the Bank of Sweden in economical Sciences in 2024. Co-author (with Daron Acemoğlu) of the book Power and Progress: Our Thousand-Year conflict Over Technology and Prosperity (PublicAffairs, 2023).
Copyright: task Syndicate, 2025. www.project-syncicate.org. From English he translated Maciej Domagała.
