By Yiannis Telonis
“Look to the past, an empire succeeds an empire – and from this you deduce the future; the same things, there is no escape from the rhythm of things” – Reflections, Marcus Aurelius, Roman Emperor, 161-180 AD.
Roman Emperor Marcus Aurelius the Wise was one of the five best rulers of the Roman Empire. A remarkable general but also a thinker and philosopher, deeply learned, who rightly earned the epithet “the wise.”
He wrote his Meditations in the common Greek of his era. He was a man whose words have withstood the test of time. And these words stand in stark contrast to the philosophy of the newly elected President of the United States, Donald Trump — the “emperor” of the modern Rome of our times. Trump, it seems, wants to turn back the clock to the era of American dominance.
Why and how Trump won
Donald Trump was elected as the new President of the United States by placing the slogan “Make America Great Again” (MAGA) at the core of his economic and political philosophy. This simple and catchy slogan clearly won the hearts and votes of the majority of American citizens.
MAGA summed up the concerns, frustrations, and sense of marginalisation felt by a significant portion of the American electorate. In this light, MAGA resembles the “Take Back Control” slogan used by Brexiteers in the United Kingdom, which was also an attempt to restore aspects of a bygone era.
This is the extent of my commentary on the political dimension of Trump’s election. Many thousands of hours will no doubt continue to be spent by experts — and laypeople — on analysing how and why Trump prevailed so decisively. Yet, I believe that such analysis falls short of fully explaining Trump’s broad victory.
The anti-globalisation stance
In this analysis, I will focus primarily on the economic implications of Trump’s election, while acknowledging that politics and economics are always intertwined.
Economically speaking, MAGA is the antithesis of globalisation since its underlying philosophy is economic nationalism. Even so, even in its economic aspect, I don’t think MAGA fully justifies Trump’s victory.
To understand why Trump won, we need to consider how the two camps engaged with the average voter.
On economic issues, the Democrats based their campaign on the well-known “It’s the economy, stupid” strategy, which had brought Bill Clinton success, and they believed it to be a winning tactic given the strong economic indicators, low unemployment, falling inflation, and declining interest rates.
Trump, on the other hand, posed a simple question to the average American voter: “Were you better off under Trump?”
With inflation in the first 45 months of Trump’s administration at 7.1%, compared to 20.1% during Biden’s first 45 months, the average American’s pocket spoke for itself.
In other words, the cost of living trumped the prosperity of economic indicators. Furthermore, Trump reinforced the impression that he would be more effective at managing inflation and the economy in the coming years. He promised something to everyone — continuing and expanding low taxes, cheap energy, moving away from green policies (“Drill, baby, drill”), cutting bureaucracy and public spending, and bringing back jobs “lost” to other countries.
In this way, he managed to break into traditional Democratic groups in key swing states — the working class, Latino and Black voters — giving him the victory.
The cherry on top for the Republicans was gaining control of both houses of Congress in the parallel elections — the so-called Trifecta.
Given that the Supreme Court now has a 6-3 ultra-conservative majority, with judges appointed during Trump’s first term, it seems at first glance that the new President is in a position to implement significant changes to the US economy and society.
Methodology of analysis
With Trump’s — evidently successful — approach to reaching the electoral base, I will attempt to outline what we can expect from the new US administration, with one caveat: Trump’s unpredictable character, which we saw during his first term, means that nothing can be taken for granted.
We will examine how a series of Trump’s economic policy proposals are likely to impact citizens’ daily lives.
Finally, we will focus on the impact of these measures on the country’s macroeconomic indicators.
Measures for citizens — which are reliably costed and which are not
As mentioned earlier, Trump promised something to everyone. This is hardly original — after all, that’s what politicians do. However, Trump never provided a costing of the measures he proposed — and he wasn’t pushed on this by the Democrats.
For the most radical measures, various costings have been done, but they differ significantly depending on the assumptions used. For this reason, I will simply present the measures along with some commentary and examine their impact on macroeconomic indicators.
Tax Cuts
For tax cuts, estimates converge.
One such estimate, by Bloomberg, gives a sense of Trump’s promises, which I present here:
1. Continuation of 2017 tax cuts: $4.6 trillion
2. Abolition of tipping tax: $250 billion
3. Increase in child credit from $2,000 to $5,000: $3 trillion
4. Abolition of tax on social security benefits: $1.8 trillion
TOTAL: $9.65 trillion
Clearly, even for the US economy, with a GDP of $27.38 trillion in 2023, a loss of government revenue of this magnitude is disproportionately large.
During his campaign, Trump defended these cuts, arguing that they would be more than offset by tariff revenues and $2 trillion in savings on government spending. Even if we accept this argument, revenue from tariffs and savings are unlikely to cover even half of the shortfall. Thus, a significant increase in US public borrowing is inevitable to cover such cuts.
Given that these measures will require Congressional approval, and despite the Republicans holding a majority in both chambers, they are likely to face significant hurdles — especially from the more fiscally conservative Republican lawmakers.
There is also the impact of such tax cuts on macroeconomic indicators. Extending tax cuts would put more money into consumers’ hands, which, given the propensity of Americans to spend, will further boost already high levels of consumption. We will explore what this might mean for macroeconomic indicators later.
Other Measures
Now let’s look at other measures, for which I will provide commentary without a cost evaluation, as there are no reliable cost estimates.
Trump’s policy proposals listed below are extensions of those announced and partially implemented during his first term. During his campaign, Trump promised to implement these fully.
But then again, he promised full implementation during his first term too. Therefore, to evaluate their impact, we must first form an opinion about which measures are realistically likely to be implemented and have an effect over the four-year term.
Also, we need to consider that Trump’s effective window for action is just one year. This is because, under the US system, midterm elections will be held towards the end of the second year of his term, in November 2026, for all 435 House seats and 33 Senate seats.
Therefore, from late 2025, the US will enter a new election cycle in which local factors will also come into play. This increases the political cost — and hence the flexibility — for those up for election. Thus, cooperation with the executive branch will become more challenging.
Impact on citizens’ daily lives
1. Deportation of undocumented migrants — Potential shortage of unskilled labour. Impact on agriculture and social care. Disruption of the social fabric, particularly in states with large immigrant populations. Estimated outcome: Partial implementation, most likely.
2. Imposing tariffs of 20% on all imported products — up to 60% on Chinese goods. Price increases for affected products, although the scale of these increases is hard to determine. In the medium term, possible substitution with US-made goods. Estimated outcome: One of the measures that can be implemented immediately via executive order. While Trump has said that the level of tariffs will be negotiated, I estimate that they will not be far off what has been announced.
3. Relaxation of environmental protection measures — incentives to intensify hydrocarbon extraction and production (“Drill, baby, drill”). In the short term, a reduction in fuel and energy costs for US consumers. In the long term, higher costs for addressing pollution problems. Estimated outcome: Announcement of implementation, even partially, immediately.
4. Withdrawal from green economy transition programmes — as Trump put it, “The green economy scam”. Withdrawal of subsidies for purchasing electric vehicles (EVs) ($7,500). Withdrawal of subsidies for replacing burners and other devices. Withdrawal of subsidies for expanding EV charging infrastructure. Estimated outcome: Immediate measure.
5. Reduction of government spending by $2 trillion, with the creation of an Efficiency Department/Commission led by Elon Musk and Vivek Ramaswamy. With annual federal spending at $6.5 trillion, Trump’s targeted savings amount to almost 30% — an achievable goal? Estimated outcome: The goal is excessively high, but I believe there will be some immediate results for publicity purposes.
Impact on macroeconomic indicators
Trump’s announcements clearly embody economic nationalism in opposition to globalisation, specialisation, and the principle of comparative advantage in global trade, which successive US governments consistently supported after World War II.
Let’s not forget: these principles enabled the explosion of wealth in both East and West and the lifting of millions of people around the globe out of poverty.
Trump gave a voice to the fears of voters who see but do not understand the changes brought about by the fourth technological revolution. Hence, the appetite for protectionism and isolation.
Tariffs, a highly mercantilist measure, will have clear effects on global trade. If the US proceeds with tariffs of this magnitude, they should expect a reaction from the other two major economic blocs — China and the EU.
In other words, a trade war, the extent and intensity of which is difficult to predict. The effect of such a war would be reduced trade activity, which in turn would lead to a contraction of economic activity.
Over a four-year period, this contraction could reach 4%. It should be noted that this figure also factors in the impact of high interest rates, which I will discuss shortly.
A second impact concerns inflation — primarily in the US, and secondarily in the EU and countries in Latin America and the Far East. Channeling more liquidity into an economy still struggling to fully control inflation, via tax cuts, is most likely to reignite inflation. At the very least, it will put monetary authorities on alert, constantly reassessing interest rate policies.
The minimum outcome anticipated is a slowdown in the rate of interest rate cuts. Should inflation begin to rise, the reversal of the declining trend cannot be ruled out. High or higher interest rates mean pressure on borrowers and, incidentally, reduced economic activity in the US and other countries, which would need to adjust their rates to protect their currencies and exports.
A third impact relates to the currency. Sustained high interest rates in the US will further strengthen the dollar. A stronger dollar means lower earnings for countries exporting to the US, notably China. It also means imported inflation for most countries, through the prices of energy and raw materials, which are priced in dollars.
Turning to the US fiscal deficit, it is inevitable that this will widen, as highlighted earlier. Worryingly, this crucial issue did not feature in the election campaign since the Democrats’ platform also envisioned increased spending and thus a widening of the deficit.
US public debt is a topic unto itself. Suffice it to say that it is expected to soar to new heights, putting the long-term viability of the US in question.
There is, of course, an opposing view from Trump’s supporters, who argue that tariff imposition will not cause inflation (referring to his first term), which means that interest rates will continue to fall, in turn boosting economic activity in the US.
They also believe that the need for additional labour will be met by those forced into the labour market when generous benefits are cut and by those freed up by the elimination of government positions. According to Trump and his supporters, we are on the threshold of a new golden age for the US.
Final Comment
It is clear that Trump has the potential to reshape the economic and social landscape of the US, and by extension, the world. He envisions, like another Roman emperor, a golden era for the US, with a return to its dominance. However, I fear that his entire vision overlooks the history so wisely recorded by the truly wise Marcus Aurelius.
