President-elect Donald Trump has doubled down on many of his economic promises in the weeks since his victory but will head into 2025 set to face formidable global players who may have other plans.
Trump is claiming a mandate and making plans to ram through an aggressive agenda of economic priorities even amid questions about whether outside forces will allow it — in addition to the practicality and wisdom of those priorities.
On at least one issue, Trump appears willing to at least tack rhetorically.
“We’ve got a little progress,” Trump told reporters earlier this month about ending the war in Ukraine, but added, “It’s a tough one.”
The more nuanced comments on a war that has rattled global energy and food markets come after months where campaign trail Trump promised not only to end the war easily but to do it before he even takes office.
The president-elect is holding firm in other areas for now, but a range of real-life situations more complex than his campaign stump speech often suggested await.
On trade, world leaders and Washington policymakers are already looking to neutralize Trump’s expansive tariff promises, especially his hope for blanket tariffs on the entire world.
On taxes, holders of US government bonds and fiscal conservatives may not be eager to go along with Trump’s tax cut plans if it means a new river of government red ink.
And oil companies aren’t a sure bet to fulfill Trump’s pledge to make energy production skyrocket.
Perhaps the key question for the year ahead is whether Trump can bend the world to his will on these issues or whether he will, in the end, be forced to bend.
The issue that looms across much of Trump’s economic agenda is America’s soaring national debt, which recently passed the $36 trillion mark and has spurred budget watchdogs to say that any bill in the years ahead needs to be fully paid for.
That is much easier said than done when it comes to taxes.
Trump has promised a dizzying array of cuts, including new trims to individual and corporate rates. Just this week, he promised he would enact “the largest Tax Cuts in the History of our Country.”
Details are scarce and the closest thing to a total tab comes from the Committee for a Responsible Federal Budget. It finds that Trump’s promises could cost more than $9 trillion over the next decade.
What nobody knows is when (or if) the debt becomes an unavoidable problem for him.
Some say things could go at least a bit higher without immediate bond market repercussions. Others offer that rapid economic growth will keep the problem manageable.
But others suspect it’s an issue that will make Trump 2.0 fundamentally different from the first time around.
“Trump may not get a chance to do what he wants to do,” said Whalen Global Advisors chairman Chris Whalen in a recent episode of Yahoo Finance’s Capitol Gains podcast.
He added that the simple act of servicing the massive debt is a problem that could mushroom and “quickly become apparent to the rest of the world.”
Politics could also get in the way, with some of Trump’s own party skeptical of his plans. This month’s fight over a government shutdown saw Trump demand a removal of one of the few checks on government borrowing: the debt limit.
Thirty-eight House Republicans bucked their president-elect and voted no, perhaps presaging more debt pushback in 2025.
The debt issue could be felt everywhere, with Trump relying on his other plans to potentially offset new spending plans. He often cites tariffs and oil drilling to pay down “a tremendous amount of debt.”
Lawmakers on Capitol Hill have also discussed using possible cost savings from Elon Musk’s extra-governmental Department of Government Efficiency to offset spending in a tax bill.
But, once again, external forces may not cooperate.
As for tariffs, Trump routinely overstates the amount of revenue that will likely be possible from import duties. History shows that retaliation from other countries — such as China cutting off agriculture imports from the US last time around — can cost the US government as much as what it brings in from duties.
And on oil, Trump often talks up the “liquid gold” under America’s feet. But the US is already producing more oil than any country in history, and prices are relatively low and expected to stay that way in the near future.
Oil companies are always wary of creating a supply glut and may be unlikely to ramp up production no matter how much easier it is to do so.
“Even if you open up some federal lands and reduce friction costs of permitting, the economics is going to be what drives those decisions,” CIBC Private Wealth US senior energy trader Rebecca Babin recently told Yahoo Finance.
But Trump nonetheless promises that his plan for the sector will not only bring in additional billions to Treasury coffers but also cut energy prices in half.
“If energy prices are halved,” Babin added, “something is terribly wrong.”
It’s this complex landscape that Trump will step into in 2025.
Whether he can adapt or exert his will may be determinative in whether he can fulfill his promises over the next four years and, as he likes to say, “restore our nation to full prosperity.”
Ben Werschkul is Washington correspondent for Yahoo Finance.
Every Friday, Yahoo Finance’s Rachelle Akuffo, Rick Newman, and Ben Werschkul bring you a unique look at how US policy and government affects your bottom line on Capitol Gains. Watch or listen to Capitol Gains on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.
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