Trump's Economic Agenda Faces a Strong Economy
an economy that may be too strong for dramatic intervention.
With unemployment at a low 4.1%, job growth surging, and output expanding above trend, economists and Federal Reserve officials warn that Trump's plans might disrupt rather than boost economic performance.
"Success for the Trump administration would be to do no harm to the exceptionally performing economy it is inheriting," said Mark Zandi, chief economist at Moody's Analytics. He believes the planned mix of tariffs, deportations, and deficit-funded tax cuts "will do harm," with the extent depending on how aggressively these policies are pursued.
The economic landscape Trump faces in 2025 differs significantly from his first term. Inflation remains stubbornly above the Federal Reserve's target, 30-year mortgage rates are high, and government borrowing costs have climbed. Bond markets signal caution, reflecting concerns about fiscal deficits and inflation.
Karen Dynan, a Harvard economist and former Obama administration official, points to immigration as a key factor in recent growth that restrictive policies could threaten. She believes that if the economic growth exceeding trend is attributed to immigration, it will be difficult to achieve similar numbers under Trump's restrictive policies.
Federal Reserve officials have begun factoring potential policy changes into their outlook. While some officials expect more upside than downside in terms of growth, others suggest slower growth and higher unemployment may result from expected trade and immigration policies.
Despite Trump creating a Department of Government Efficiency to find savings, no plans address major deficit drivers like health and retirement benefits, which both parties consider untouchable.