Trumponomics 2025: Economic Effects, Market & Policy Impact

Donald Trump, the 47th President of the United States, is undeniably one of the most influential figures in global economies and politics. His unique approach to governance, particularly in economic policy, has left a lasting mark. Given his remarkable influence, it's not surprising that a term was coined to describe his economic strategies and philosophies: Trumponomics. Let's examine this economic framework in greater detail:

TL;DR

• Trumponomics centres on four key pillars: tax cuts, deregulation, protectionism, and trade policy reform

• Trump's second administration has seen significant market volatility, particularly following tariff announcements in April 2025

• The S&P 500 experienced historic swings in 2025, with losses exceeding $6 trillion, followed by record single-day gains after a 90-day tariff pause

• US households face estimated additional costs of $1,300-$2,100 annually due to tariff policy

• Recession risks have increased for 2025, with major banks raising their forecasts amid concerns over stagflation

• The upcoming 4 November 2025 off-year general elections could determine whether Trump's economic agenda continues through a second full term

Donald Trump's Economic Background: From Business to Presidency  

To grasp Trumponomics fully, it's essential to understand the man behind it: Donald John Trump. 

Before becoming the 47th President of the United States, Trump was a prominent American businessman and media personality. With a bachelor's degree in Economics from the University of Pennsylvania, Trump’s background in business and finance heavily influenced his approach to economic policy. 

When Did Donald Trump Become President?

Trump served as a US president twice, once in 2016 and the second time in 2025.

Trumponomics Definition: 4 Core Economic Policy Pillars

Trumponomics is the term used to describe President Donald Trump’s economic policies and plans. To understand what this really means, it is crucial to look at its key pillars: tax cuts, deregulation, protectionism, and trade.

Tax Cuts

During the Trump administration, taxes were reduced to promote economic growth and job creation. The Tax Cuts and Jobs Act (TCJA) lowered personal exemptions, reduced the alternative minimum tax for individuals, and abolished it entirely for corporations.

Protectionism

Trump is recognised for his strong support of American manufacturing, aiming to limit imports through the imposition of tariffs. He sought to reduce regulations on domestic manufacturing and create more jobs within the US labour force, intending to decrease dependence on foreign businesses.

Trade

Trumponomics strives to reduce imports and boost exports by renegotiating trade deals with foreign countries and imposing tariffs.

Deregulation

Trump loosens regulations on businesses to increase efficiency, reduce costs, and promote new ideas. (Source: Investopedia)

Trump's First-Term Economic Record: GDP, Jobs, Debt & Markets (2017–2021)

During the first Trump administration, several key economic indicators were affected:

• Taxes: In 2017, Trump's administration passed the Tax Cuts and Jobs Act (TCJA), which lowered individual and corporate tax rates. According to the Congressional Budget Office, whilst this spurred short-term economic growth, it primarily benefited higher-income households and contributed to the federal budget deficit, adding approximately $1.9 trillion to the national debt over ten years.

• Government Spending: Trump increased government spending, notably on defense and the military. Despite his campaign promise to eliminate the national debt, it grew by 39%, reaching $27.75 trillion by the end of his term in January 2021.

• Trade: Trump implemented protectionist trade measures, particularly through tariffs on Chinese imports exceeding $360 billion in goods. This formed part of his broader "America First" economic strategy, which aimed to reduce trade deficits and protect US manufacturing jobs. However, studies by the Federal Reserve indicated these tariffs had mixed economic effects, with costs largely passed on to American consumers.

• Labour Market: Trump's presidency was marked by continued low unemployment, initially benefiting from the economic expansion inherited from the previous administration. The unemployment rate reached a 50-year low of 3.5% in February 2020. However, the COVID-19 pandemic caused an economic downturn, with the unemployment rate rising sharply to 14.7% in April 2020.

• COVID-19 Response: In response to the pandemic-induced recession, Trump signed the $2 trillion CARES Act in March 2020. This legislation provided economic relief, including direct payments to individuals and expanded unemployment benefits. However, this contributed to a budget deficit, with the fiscal year 2020 deficit reaching $3.1 trillion, triple the previous year's deficit.

• Debt: The US national debt surged under Trump's policies, exacerbated by tax cuts and increased spending. The federal deficit grew to nearly $1 trillion in fiscal year 2019, nearly double earlier forecasts by the Office of Management and Budget.

• Inflation: The Trump administration's first year saw relatively low inflation rates, averaging approximately 1.9% year-over-year, according to the Consumer Price Index.

• Healthcare: Trump's administration attempted but failed to repeal the Affordable Care Act. However, the number of uninsured Americans increased by approximately 2.3 million during his term, partly due to policies that reduced Medicaid expansion and other healthcare provisions.

• Economic Performance: According to data from the Bureau of Economic Analysis, real GDP growth averaged 2.3% annually during Trump's pre-pandemic years (2017–2019), comparable to the 2.4% growth in the final three years of the previous administration. Job creation during Trump's pre-pandemic tenure averaged 191,000 per month, slightly lower than the 227,000 monthly average in the last administration's final three years.

• Fiscal and Monetary Policies: Despite Trump's focus on deregulation and tax cuts, his fiscal policies resulted in higher deficits and an increased national debt. The Federal Reserve's monetary policies under Trump involved raising interest rates from 2017 to 2018, then cutting them three times in 2019 in response to global economic slowdown and trade tensions.

Trump's Stock Market Impact: S&P 500, Nasdaq & Market Volatility

Trump has undeniably influenced financial markets and reshaped the economic landscape. In 2024, his pro-cryptocurrency stance played a pivotal role in sparking a bull run in digital assets, with Bitcoin reaching new all-time highs. In early 2025, Trump's AI chip deal with the UAE sparked a surge in technology stocks, particularly benefiting companies like Nvidia, whilst adding to overall market volatility.

During his first term, from his inauguration on January 20, 2017, to his final full day in office on January 20, 2021, the S&P 500, the broadest measure of the US stock market, surged by approximately 67%. This significant gain is all the more remarkable given that it includes the market's dramatic plunge in March 2020, when the pandemic caused widespread panic and the S&P 500 experienced its worst single-day decline since 1987

Trumponomics in 2025: Tariffs, Market Crashes & Economic Volatility

Trump's second term has been marked by significant economic volatility, particularly related to trade policy:

Stock Market Volatility

Tariff Shock:

The tariff announcement in early April 2025 led to the most significant two-day decline in US stock market history (3-4 April), with more than $6 trillion in value wiped out from US markets. Global equity losses over three days totalled approximately $10 trillion, around 10% of global GDP (March 3, 4, and 7). Sharp declines were observed in markets across Asia, Europe, and the Americas in early April.

Historic Rally:

In mid-April 2025, Trump announced a 90-day pause on most new tariffs, excluding those on China. The market staged a historic rally, with the Dow Jones Industrial Average rising nearly 8%, the S&P 500 gaining almost 9.5%-its best single-day performance since 2008-and the Nasdaq soaring more than 12% in a single session.

S&P 500 Decline

The index experienced its most significant four-day fall since the 1950s (from  2 April  to 7 April, 2025). It approached bear market territory, with losses nearing 20% from recent highs, before the tariff pause announcement reversed the trend.

Rising Consumer Costs

The Tax Foundation estimates that the average US household will face an added burden of nearly $1,300 in 2025 due to tariff policies. Other projections by the Peterson Institute for International Economics suggest annual costs could exceed $2,100 per household, as tariffs on imported goods increase prices for consumers.

Impact on GDP and Income

According to Oxford Economics, US GDP is expected to contract by 1.0% when retaliatory measures from trading partners are included. Average after-tax income may decline by 1.3%, reducing household purchasing power.

Risk of Recession and Stagflation

Major financial institutions, including JPMorgan Chase and Goldman Sachs, have raised their recession forecasts for 2025, with probabilities now exceeding 35%. Economists warn of likely stagflation, rising inflation alongside stagnating economic growth, potentially emerging by mid-2025. The Federal Reserve faces a challenging policy environment, balancing concerns about inflation against growth risks.

2025 Elections (4 November 2025): Potential Impact on Trump's Economic Agenda 

The upcoming off-year general elections on 4 November  2025 may prove pivotal in determining the future trajectory of Trumponomics. These may significantly impact Trump's ability to implement his economic agenda over the remainder of his term.

Key Economic Issues:

• Trade Policy: Voters will effectively render judgment on Trump's tariff strategy and its impact on consumer prices and economic growth. Recent polling suggests trade policy has become a central concern for voters, particularly in manufacturing states.

• Fiscal Policy: The composition of Congress will determine whether Trump can pursue additional tax cuts or face pressure to address the growing federal deficit, which is projected to exceed $2 trillion in fiscal year 2025.

• Regulatory Approach: Congressional control will influence the pace and extent of deregulation across industries, particularly in financial services, energy, and technology sectors.

• Market Implications: Financial markets are likely to experience heightened volatility in the weeks leading up to 4 November, as investors assess the potential for policy continuity or change. 

Conclusion

Donald Trump's economic policies, collectively known as Trumponomics, have been marked by bold moves aimed at reshaping the US economy through tax cuts, deregulation, protectionism, and trade policy reform. Whilst there have been specific successes, such as historically low unemployment rates during his first term and periods of strong stock market performance, the approach has also generated significant challenges.

The COVID-19 pandemic played a substantial role in shifting the economic landscape during Trump's first term, overshadowing many policy outcomes. His second term has been characterised by significant market volatility, particularly related to tariff policies, with trillion-dollar swings in equity values and growing concerns about recession and stagflation.

With the 4 November 2025 elections approaching, voters will have the opportunity to influence the direction of Trump's economic agenda through their congressional choices. The election results will determine whether Trumponomics continues in its current form or faces legislative constraints.

Whilst Trump's economic legacy remains debated amongst economists and policymakers, his influence on US monetary policy is undeniable. His approach has left a lasting imprint on discussions around taxation, regulation, international trade, and the role of government in the economy. The coming months will prove crucial in determining the long-term impact of Trumponomics on the US and global economies.

*Past performance does not reflect future results. The above are only projections and should not be taken as investment advice.