President-elect Donald Trump has reiterated many of his bold economic promises in the weeks following his election, but as he prepares for his return to the White House in 2025, he faces powerful global forces that may challenge his ambitious agenda.
Trump is positioning himself as having a clear mandate to push through an aggressive economic agenda, despite questions about whether external factors will allow him to do so. These doubts extend not only to the practicality of his proposals but also to their long-term consequences.
On certain issues, Trump appears to be softening his stance. For instance, regarding the war in Ukraine, he recently commented on some progress but acknowledged its complexity, noting, “It’s a tough one.” These more cautious remarks follow months of campaign promises where he insisted he could quickly end the conflict even before taking office.
However, in other areas, Trump remains committed to his original plans. Yet, the reality he faces may be more complicated than the simplicity of his campaign rhetoric suggested. On trade, global leaders and U.S. policymakers are already moving to mitigate his promised sweeping tariffs, particularly his pledge for blanket tariffs on all countries. His proposed tax cuts also face challenges, especially from bondholders and fiscal conservatives who may be hesitant to accept more government debt. Furthermore, Trump’s promises to boost U.S. energy production may not be as easily fulfilled, given the current state of global oil markets.
A critical issue that will loom over Trump’s economic agenda is America’s national debt, which has surpassed $36 trillion. This growing debt raises concerns about whether any of his proposed spending plans can be implemented without exacerbating the problem. Trump’s proposed tax cuts, which could cost more than $9 trillion over the next decade according to some estimates, may place even greater strain on the nation’s finances.
While some argue that the debt might not pose an immediate problem, others believe that the growing cost of servicing the debt could become unsustainable, especially as Trump’s agenda unfolds. Some observers, like Chris Whalen of Whalen Global Advisors, suggest that Trump might face significant challenges if he cannot generate the expected economic growth or make headway on his fiscal policies.
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Additionally, the political landscape may not always align with Trump’s plans. In a recent government shutdown debate, Trump’s push to remove the debt limit faced resistance from his own party, with 38 House Republicans voting against his proposal. This suggests that his own party may push back on his economic policies in 2025.
Trump’s ability to manage the economy could also be shaped by external forces. While he hopes to offset new spending with revenue from tariffs and increased oil production, these plans may not work as expected. History has shown that tariffs often lead to retaliatory actions from other countries, which can erode the revenue gains from such duties. Similarly, while the U.S. is already the world’s top oil producer, the economics of the oil market might prevent companies from ramping up production despite Trump’s promises to cut energy prices.
Rebecca Babin, an energy trader at CIBC Private Wealth US, explained that economic factors, not just government policies, will drive decisions in the oil sector. Even if the government were to open up more federal land for drilling or streamline permitting processes, oil companies are unlikely to increase production drastically, especially with current low prices.
As Trump prepares to take office again in 2025, the broader economic and geopolitical context will play a significant role in shaping his presidency. The key question will be whether he can adjust his plans to the realities of a complex global economy, or if external forces will force him to compromise on his promises of economic renewal and national prosperity.