The U.S. presidential election was held on November 5, and as of 8:00 AM EST on November 6, presidential candidate Donald Trump has secured 295 electoral votes, capturing all seven swing states, effectively confirming his position as the 47th President of the United States.

The Republican Party has also secured 52 seats in the Senate. While the final results for the House of Representatives remain undetermined, current tallies show the Republican Party leading with 204 seats compared to the Democrats’ 188 seats. If the Republicans also gain control of the House, the U.S. will enter a period of unified Republican governance.

(Source: Bloomberg)

Under a fully Republican administration led by Trump, what policies might have an impact on the economy, and how could these policies steer economic trends?

Tariffs and Trade

Trump’s tax policy is expected to focus on extending provisions of the Tax Cuts and Jobs Act (TCJA), including lowering the top personal income tax rate and lifetime individual exemption limits, with plans to make these tax cuts permanent. Additionally, he aims to lower the corporate tax rate from 21% to 15% and exempt tips and overtime pay from income taxes. On the trade front, Trump plans to impose tariffs ranging from 10% to 20% on all imports and up to 60% on Chinese goods.

Immigration

During Democratic administrations, a relatively lenient stance on illegal immigration has led to record-high numbers of undocumented immigrants, posing potential threats to domestic security. Trump’s policy aims to expel illegal immigrants as comprehensively as possible. He has pledged to reinstate his first-term immigration policies, including the “Remain in Mexico” policy and the travel ban. Additionally, Trump plans to halt refugee admissions and reduce the number of legal immigrants entering the U.S.

Energy

Trump favors traditional energy sources and views climate change as “a hoax.” He has promised to “unleash” America’s energy sector by reducing restrictions on oil and natural gas exploration and encouraging the construction of more refineries. Trump also intends to repeal the Biden administration’s Inflation Reduction Act to reduce subsidies for wind and solar energy, as well as electric vehicles, while expediting the approval process for coal and nuclear power projects.

Financial Regulation

Trump’s approach to financial regulation has historically been more relaxed. The Federal Reserve introduced the Basel III Accord draft in July of last year, initially requiring banks with assets exceeding $100 billion to hold sufficient capital to absorb potential losses. In September of this year, the Fed proposed raising the Common Equity Tier 1 (CET-1) capital ratio for Global Systemically Important Banks (G-SIBs), or “too big to fail” banks, to 9%. Trump’s election could potentially lead to the weakening or shelving of Basel III regulations.

Impact on the Economy

Based on the key policies outlined above, we have referred to the report by Oxford Economics to assess how Trump’s policies may influence the economic trajectory.

The report suggests that if Trump is elected with full Republican control, the extension of the TCJA and the exemption of tips and overtime pay from income taxes could boost real GDP by 1% in the short term. However, over the long term, economic growth could slow due to restrictive immigration policies and increased tariffs on imports.

(Source: Oxford Economics)

Regarding inflation, fiscal expansion and higher import tariffs are projected to raise inflation by 0.8 percentage points. However, the Federal Reserve is expected to halt interest rate cuts by 2026 and begin raising rates in 2027 to prevent runaway inflation.