Americans Are Feeling Worse About Their Finances: Would a Trump Win Turn It Around?
With the presidential elections just a few months away, Americans are taking a deep dive into what the candidates have to offer for their future financial well-being. This year’s candidates, including Donald Trump and Joe Biden, face serious pressure as Americans struggle to stay financially afloat after a season of steep inflation.
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According to December 2023 data from the Federal Reserve, 19% of Americans are “just getting by” and 9% are “finding it difficult to get by,” meaning over a quarter of Americans feel financially uncomfortable. While 72% feel OK financially, there has been a year-over-year decline in the percentage of Americans feeling financially steady, with inflation continuing to be a major concern.
As Americans struggle financially and seek support, this November’s election has the potential to change the economy. Here’s a look at how a Trump win could affect the U.S. economy and the trickle-down effects his victory would have on individual wallets.
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Tariff Increases
Consumers and business owners hoping for reduced inflation are unlikely to see lower prices on goods if Trump is elected due to the substantial taxes on imports he plans to initiate.
“If Donald Trump is elected in November, his economic program will likely include substantial increases in tariffs,” said David I. Kass, who formerly held senior positions with the federal government and is a clinical professor of finance at the University of Maryland Robert H. Smith School of Business.
Trump’s proposal includes a tariff of 10% on most imports and a 60% tariff on Chinese imports. “Although these tariffs would be intended to boost domestic manufacturing, the primary result will be higher costs for consumers and businesses,” Kass said. “This in turn will likely result in retaliatory tariffs by China and other countries, with the net outcome of a substantial reduction in international trade including exports from the U.S.”
While no one wants to pay higher prices for groceries and essential products, not all socioeconomic groups will be affected equally.
“Economists have also found that poorer consumers would be most hurt by such a tariff scheme, as they consume a much higher share of their income than richer consumers,” said Ryan Monarch, assistant professor in the economics department at Syracuse University.
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Inflation Uptick
Trump’s presidential economic agenda also consists of a planned clampdown on immigration, which could impact the nation’s inflation rates and individuals’ financial security.
“These policies include mass deportation of undocumented immigrants and greatly reduced entry visas for working immigrants,” Monarch said. “These policies would also lead to higher prices for everything from housing to groceries, as reduced labor supply in construction, agriculture and other sectors would lead to higher costs throughout the economy.“
Despite recent efforts to curb inflation, American budgets are bound to be stretched further if Trump is elected.
“The current reduction in inflation being accomplished by the restrictive monetary policy of the Federal Reserve will be reversed,” Kass said. “This will have an adverse impact on American consumers, with its greatest impact on lower income and younger populations.”
Tax Cuts
Like his first campaign, Trump promises to make tax cuts if he wins the presidency.
“Donald Trump is expected to pursue further tax cuts for individuals and businesses, as well as extend the life of the tax reductions from the Tax Cuts and Jobs Act of 2017 (TCJA),” Kass said. “This should result in improving the finances of individuals and corporations. Maintaining or reducing the tax cuts from the TCJA should also lead to higher equity valuations.”
While this move may benefit the wealthy and major corporations, it could hurt the average consumer, as tax cuts would provide less revenue to fund the government, resulting in rising interest rates to compensate for the loss.
Higher Interest Rates
For those who rely on credit to meet daily living expenses, Trump’s policy may pose a challenge. As his policies are likely to result in higher prices, the Federal Reserve may react by increasing interest rates in order to contain the inflation.
“Higher expected inflation resulting from higher tariffs and large budget deficits will result in higher interest rates, which in turn will exert downward pressure on asset prices and a slowing of the U.S. economy,” Kass said.
How To Prepare Your Finances for a Trump Election
It’s impossible to predict the future, but if Trump returns to the presidency, his campaign statements and previous policies indicate he could make a big splash in your financial future. From inflation to tax cuts and trade tariffs, serious financial shifts may be in order. Here are a few ways you can safeguard your finances before election day.
Diversify Investments
With market volatility likely in the coming months if Trump is elected, protecting your finances by diversifying your investments is crucial. Spreading your investments across asset classes, including stocks, bonds and mutual funds, can help minimize risk and offer a buffer against market fluctuations.
Build an Emergency Fund
The future is always unknown, and with potential changes under a Trump administration, having a financial cushion is highly recommended. An emergency fund provides a safety net for unexpected expenses or policy changes, offering greater peace of mind.
Stay Vigilant
In these uncertain times, staying informed is key. Keep yourself educated on policy changes, new regulations and tax updates to understand how these changes could affect you — in both positive and negative ways. Plus, staying vigilant can help you discover new benefits you might be eligible for and allow you to make proactive adjustments to your financial strategy.
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This article originally appeared on GOBankingRates.com: Americans Are Feeling Worse About Their Finances: Would a Trump Win Turn It Around?