By Dhanesh Amin

Donald Trump’s second term as president will bring a new set of economic policies aimed to address concerns about rising costs, job creation, and the state of American industry. His plan includes sweeping changes across trade, taxation, labor markets, energy, housing, and financial regulation. Here’s a look at what Trump’s administration is proposing for the next four years.

Revamping Trade Policy

Trump has signaled a strong focus on protectionism, aiming to reshape trade relations with a series of tariff increases. One of his first moves will be implementing a 10% tariff on all imports, covering a wide range of goods entering the United States. The goal is to reduce the trade deficit and encourage companies to manufacture more products domestically.

A central part of this trade strategy involves China. Trump plans to impose a 60% tariff on Chinese imports, significantly higher than the tariffs set during his first term. He believes this will pressure businesses to move production back to the U.S. or to other non-Chinese suppliers. Additionally, Trump has indicated his intention to renegotiate existing trade agreements, including the U.S.-Mexico-Canada Agreement (USMCA), to secure terms he views as more beneficial for American workers and industries.

Tax Cuts and Corporate Policy

Building on the tax reforms of his first term, Trump’s economic plan includes further reductions in the corporate tax rate. He aims to lower the rate from the current 21% down to 15%, to boost U.S. business competitiveness and attract foreign investment.

Trump also wants to extend individual tax cuts from the 2017 Tax Cuts and Jobs Act, which are set to expire in 2025. This would include keeping the lowered individual income tax rates and the increased standard deduction, which have provided tax relief to many lower income Americans.

For businesses, Trump plans to restore the ability to immediately deduct investments in equipment and research. By doing so, he hopes to encourage companies to reinvest in their operations, leading to increased productivity and innovation.

Immigration Reform and Labor Market Changes

Immigration reform is a key priority in Trump’s second term agenda, with plans to reduce the number of undocumented workers in the United States. Trump has announced a large-scale deportation plan, aimed at removing millions of undocumented immigrants. He argues that this will help open job opportunities for American citizens, particularly in sectors like construction and manufacturing.

In addition, the administration plans to restrict work visas, such as H-1B visas for highly skilled workers, to prioritize hiring American workers. To address potential labor shortages that may arise from these measures, Trump aims to expand vocational training and apprenticeship programs. His goal is to equip American workers with the skills needed for high-demand jobs, particularly in industries like technology and skilled trades.

Boosting the Housing Market

The rising cost of housing remains a significant concern for many Americans, and Trump’s plan seeks to increase the supply of homes by opening up federally protected lands for residential development. By making more land available for construction, the administration aims to help alleviate the housing shortage and make homeownership more accessible.

Trump also intends to reduce federal building regulations, which he believes drive up construction costs and delay new projects. The plan includes providing tax incentives for first-time homebuyers and removing barriers that make it difficult for low-income families to qualify for mortgages.

Energy Policy: Emphasizing Fossil Fuels

Trump’s energy policy centers around increasing domestic production of oil, gas, and coal. The administration plans to expand drilling on federal lands, including areas that were previously off-limits, such as parts of the Arctic National Wildlife Refuge. By boosting fossil fuel production, Trump aims to reduce energy costs for consumers and enhance U.S. energy independence.

The administration also plans to roll back a series of environmental regulations that Trump believes are hampering growth in the fossil fuel sector. This includes easing restrictions on methane emissions and reducing the requirements for environmental reviews on new projects.

While the focus is on traditional energy sources, the administration has indicated it will review federal funding for renewable energy initiatives. Trump has expressed skepticism about the economic viability of solar and wind power, suggesting that federal subsidies for these projects will be cut back.

Social Security and Tax Relief for Workers

Trump’s proposed tax relief measures include eliminating federal income taxes on Social Security benefits. This change aims to provide financial relief to retirees, many of whom have seen their living costs rise in recent years. By removing taxes on Social Security payments, the administration hopes to increase the disposable income of seniors.

Additionally, Trump plans to eliminate taxes on tips and overtime pay, targeting workers in industries like hospitality and food service. He believes this will provide much needed relief to low-wage workers who rely on these sources of income.

Nevertheless, the Trump administration has not yet released specific details on how it plans to address potential funding shortfalls for Social Security. The removal of taxes on benefits could reduce revenue for the program, which is already facing financial challenges.

Financial Deregulation and Market Reforms

The Trump administration is expected to continue its focus on deregulating financial markets. Trump has called to roll back parts of the Dodd-Frank Act, a 2010 financial reform law aimed at preventing another financial crisis by increasing oversight and regulation of banks and financial institutions. He argued that the regulations are overly burdensome for banks and financial institutions. His goal is to increase lending and support business growth by reducing compliance costs.

Trump has also expressed interest in taking a more favorable stance toward cryptocurrencies. He has hinted at reducing regulatory barriers for digital currencies and blockchain technologies, potentially paving the way for increased innovation in the financial sector.

The administration plans to review Federal Reserve policies concerning interest rates. Trump has advocated to keep interest rates low to support economic growth, even as inflation concerns persist.

Changes in Education and Workforce Development

Education policy under Trump’s second term will emphasize vocational training and skill development. The administration plans to increase funding for trade schools and apprenticeships, aiming to address the skills gap in industries like manufacturing, healthcare and information technology.

Trump has also reaffirmed his commitment to expanding school choice programs, including increased support for charter schools and vouchers. The administration aims to reduce federal oversight of public education, giving more control to state and local governments, with Trump even calling to close the Department of Education.

Healthcare Policy Proposals

In healthcare, Trump has reiterated his desire to repeal the Affordable Care Act (Obamacare) and replace it with a system focused on health savings accounts and private market solutions. He plans to expand the availability of private Medicare Advantage plans and increase transparency in hospital pricing, allowing consumers to shop for healthcare services more effectively.

Trump has also promised to introduce a new drug pricing policy aimed at lowering the cost of prescription medications. Specific details have yet to be released, but the administration intends to negotiate directly with pharmaceutical companies to secure lower prices for consumers.

Conclusion

Trump’s second-term economic agenda outlines a series of bold initiatives focused on reducing taxes, increasing domestic production, and reshaping immigration and trade policies. His approach emphasizes deregulation, traditional energy sources, and a shift towards more market-driven solutions in healthcare and education.

The proposed policies aim to stimulate economic growth and address key issues faced by American families, including the rising cost of living and job availability. As these plans are implemented, their impact on the economy will be closely watched, shaping the economic trajectory of the United States for years to come.

By Dhanesh Amin

In today’s economy, consumers face a seemingly endless array of choices. Each of us makes about 35,000 decisions daily. These range from simple choices, like what to eat for breakfast, to complex ones involving relationships, finances, or work. However, due to limited time and energy, many decisions go completely unexamined, and consumers often rely on a preselected default.

Consider an auto-renewing Netflix subscription, automatic retirement plan contributions, or a default web browser. These are all passive selections made simply by using a service or product. Whether consciously or not, consumers make choices merely by allowing the defaults to stand.

In the early 2000s, behavioral economists Richard Thaler and Cass Sunstein popularized the concepts of “nudges” and “choice architecture” to describe how thoughtfully set defaults can encourage certain decisions without limiting personal freedom. This idea rests on people’s preference for simplicity and stability. By eliminating the need for extensive comparisons and deliberation, defaults help conserve valuable resources like time, energy, and even money.

A key principle behind defaults is loss aversion, which suggests that people feel the pain of loss more strongly than the pleasure of gain. Changing from the default can feel risky, creating uncertainty and discomfort that discourages deviation from established norms. This natural tendency stacks the odds in favor of the default.

Choice architects often design defaults that align with beneficial choices for the average person, reducing mental strain and simplifying decisions. While some view defaults as a form of manipulation, they can lead to positive outcomes for individuals and society alike. For instance, companies like Verizon and Boston Consulting Group use an “opt-out” system for retirement savings. Employees are automatically enrolled in a retirement plan at a pre-set contribution rate unless they actively choose not to participate. Contributions are deducted from each paycheck, and although employees can change their contribution rate or opt out at any time, most stay with the default. As a result, many employees end up accumulating substantial amounts they might not have otherwise saved.

Despite these benefits, defaults have also drawn criticism for potential misuse. Some companies and industries set up defaults that favor them and disadvantage consumers. Examples include automatically renewing subscription services that consumers forget about, suboptimal healthcare plans with unnecessary testing, and lax data privacy agreements that sell user data. In these cases, companies sometimes rely on “sludge” — barriers that make opting out or adjusting settings difficult to bypass consumer suspicion. Consumers are often hesitant to read pages of contracts just to receive a service, and many companies rely on this oversight. These hurdles may involve navigating lengthy customer service calls or complex web forms, making it nearly impossible for users to break free from unwanted commitments.  

On Oct. 16, 2024, the Federal Trade Commission announced a final “Click-to-Cancel” Rule making it easier for consumers to end recurring subscriptions and memberships. This new legislation will require sellers to make it as easy for consumers to cancel their enrollment as it was for them to sign up. For consumers, this means greater control over their subscriptions and fewer instances of being charged for services they no longer wish to use.

Defaults, while undeniably effective in shaping consumer behavior, can be a double-edged sword. When used ethically, they simplify decision-making and promote beneficial outcomes like increased savings or improved health. However, when leveraged for profit or manipulation, defaults can trap consumers in unwanted subscriptions or suboptimal choices. 

Ultimately, the key lies in the responsible use of defaults; companies and policymakers must balance the convenience of defaults with transparency and fairness, ensuring that the power of choice remains firmly in the hands of individuals.

By Nathan Balis

As former President Donald Trump prepares to re-enter the White House in less than three months, United States trade policy appears poised for a dramatic shift toward protectionism. His proposals to set a 60% tariff on Chinese goods and a 10% to 20% blanket tariff on all imports promise to have severe economic consequences.

The complex, long-term effects of tariffs, compounded by the political rhetoric surrounding them, have fueled controversy. No matter how politically clouded the issue of tariffs has become, data from Trump’s 2018 tariffs – maintained by President Biden – shows they have had net negative effects on the domestic economy. 

While Trump’s tariffs may have provided short-term employment boosts in select industries, the long-term economic costs are steep: an estimated 142,000 jobs lost in downstream sectors, $625 per household in higher costs, a 0.1% reduction in capital stock, and a 0.2% hit to GDP. Combined, these policies amount to an $80 billion annual tax on Americans according to the Tax Foundation, a nonpartisan think tank. 

President-elect Trump’s plans for his second term are projected be more extreme, including hiking taxes by another $524 billion annually and shrinking employment by 684,000 full-time equivalent jobs. These values don’t reflect the total costs associated with retaliatory measures and a global trade war.

Indeed, tariffs are hard to justify on economic grounds alone. They must offer clear strategic value. They may, however, be warranted when national security is at risk, as outlined in Section 232 of the Trade Expansion Act of 1962.

For instance, tariffs may be justified to reshore critical industries vital to U.S. defense and technology. The pandemic’s disruption of global supply chains has highlighted the need to reduce reliance on adversarial nations.

However, imposing harsh tariffs on key U.S. allies, such as South Korea, Japan, Germany, and France, risks undermining our nation’s alliances, which are our most vital foreign policy asset. This is of ever-increasing relevance in a world already destabilized by ongoing conflicts in Ukraine and the Middle East, as well as a growing global challenge to U.S. power and democracy posed by authoritarian regimes.

Rather than relying on broad tariffs, United States trade policy should prioritize reshoring critical industries – such as semiconductor manufacturing – not only to the U.S. mainland, but also to allied nations with established infrastructure. This approach makes economic sense. For instance, South Korea, a key ally with a strong semiconductor industry, can absorb production more efficiently than newly built factories in the U.S. While the CHIPS and Science Act is a positive step, it cannot overcome the U.S. shortage of skilled labor needed to scale up advanced chip production. More importantly, reshoring industries to close allies strengthens U.S. alliances by deepening economic ties. The relocation of key supply chains to trusted partners offers the U.S. a more sustainable solution than unilateral tariffs, which risk isolating essential allies.

With global economic and geopolitical challenges mounting, U.S. trade policy will define its resilience. While tariffs carry economic costs, when applied strategically, they can enhance national security by protecting key supply chains and reinforcing alliances. The current steel tariffs are a step forward but should be fine-tuned through closer collaboration with Japan, a key U.S. ally and the world’s third-largest steel producer. By contrast, high tariffs on washing machines lack economic justification. In a world where alliances are as vital to security as domestic economic strength, the U.S. must craft trade policies with caution and foresight.