Like most pres­i­dents, Don­ald Trump faces an econ­o­my that sel­dom bends to po­lit­i­cal am­bi­tions.

The Re­pub­li­can has promised strong growth, high tar­iffs, in­come tax cuts and boom­ing oil­fields. But de­spite the sol­id job mar­ket and low 4.1 per cent un­em­ploy­ment rate, he has to con­tend with head­winds like in­fla­tion, a bud­get deficit, in­creased ten­sions over trade, the fall­out from his plans to cur­tail im­mi­gra­tion and a per­sis­tent wealth gap.

Each of these is­sues could help to shape how vot­ers feel about a pres­i­dent they re­turned to the White House with the spe­cif­ic goal of fix­ing the econ­o­my.

For his part, Trump wants to blame all the chal­lenges be­fore him on his pre­de­ces­sor, Joe Biden, who in turn blamed Trump in 2021 for the prob­lems his own ad­min­is­tra­tion had to tack­le.

“This be­gins with con­fronting the eco­nom­ic chaos caused by the failed poli­cies of the last ad­min­is­tra­tion,” Trump told the World Eco­nom­ic Fo­rum on Thurs­day.

Here are five eco­nom­ic forces that could shape the first year of Trump’s pres­i­den­cy:

For vot­ers, the price still isn’t right

Whip­ping in­fla­tion is eas­i­er said than done.

In AP Vote­Cast, an ex­ten­sive sur­vey of last year’s elec­torate, 4 in 10 vot­ers called in­fla­tion the “sin­gle most im­por­tant fac­tor” in their choice for pres­i­dent. About two-thirds of this group vot­ed for Trump — a sign he owes his vic­to­ry in large part to the high cost of gro­ceries, gaso­line, hous­ing, au­tos and oth­er goods.

Go­ing for­ward, month­ly re­ports on the con­sumer price in­dex will be a clear mea­sure of whether Trump can de­liv­er. But in­fla­tion has ac­tu­al­ly in­creased in re­cent months. Con­sumer prices were in­creas­ing at a healthy 2.4 per cent an­nu­al rate in Sep­tem­ber, com­pared with 2.9 per cent in De­cem­ber. Econ­o­mists say in­fla­tion could wors­en if Trump im­pos­es tar­iffs and us­es deficit-fund­ed in­come tax cuts.

Re­pub­li­cans of­ten hit Biden hard on egg prices. But De­moc­rats could use sim­i­lar at­tacks on Trump. Over the past year, cof­fee costs have risen just 1 per cent for US con­sumers, but the In­ter­na­tion­al Mon­e­tary Fund has the price of the ac­tu­al beans climb­ing 55 per cent in a sign that lattes, espres­sos and plain old cups of joe could soon cost more.

Then there’s hous­ing. Vot­ers are still frus­trat­ed by high mort­gage rates and prices stay­ing el­e­vat­ed due to a short­age of prop­er­ties. Shel­ter is 37 per cent of the con­sumer price in­dex. Price in­creas­es for hous­ing have eased, but shel­ter costs are still ris­ing at 4.6 per cent a year, com­pared with an­nu­al in­creas­es av­er­ag­ing 3.3 per cent be­fore the pan­dem­ic.

Trump is bet­ting that more en­er­gy pro­duc­tion can cut in­to in­fla­tion rates, but do­mes­tic pro­duc­tion is al­ready near record lev­els, ac­cord­ing to the gov­ern­ment.

Which tar­iffs are

re­al­ly com­ing

Trump says 25 per cent tar­iffs are com­ing for Mex­i­can and Cana­di­an im­ports as soon as Feb­ru­ary 1. He’s al­so talked about ad­di­tion­al tar­iffs of 10 per cent on Chi­nese goods. His stat­ed goal is to stop il­le­gal bor­der cross­ings and the flow of chem­i­cals used to make drugs such as fen­tanyl.

For Trump, tar­iffs are a diplo­mat­ic tool for his pol­i­cy goals. But they’re al­so a threat pos­si­bly meant to jump­start trade talks. They’re al­so a rev­enue rais­er that he claims could bring tril­lions of dol­lars in­to the trea­sury.

Trump did in­crease tar­iffs dur­ing his first term, with rev­enue col­lec­tion more than dou­bling to an an­nu­al rate of US$85.4 bil­lion, which might sound like a lot but was equal to just 0.4 per cent of the gross do­mes­tic prod­uct. Mul­ti­ple analy­ses by the Bud­get Lab at Yale and the Pe­ter­son In­sti­tute for In­ter­na­tion­al Eco­nom­ics, among oth­ers, say the threat­ened tar­iffs would in­crease costs for a typ­i­cal fam­i­ly in a way that ef­fec­tive­ly rais­es tax­es.

What re­al­ly mat­ters is whether Trump de­liv­ers on his threats. That is why Ben Har­ris, a for­mer Biden ad­vis­er who is now di­rec­tor of eco­nom­ic stud­ies at the Brook­ings In­sti­tu­tion, says vot­ers should fo­cus on av­er­age tar­iff rates.

“Trade is re­al­ly tricky” Har­ris said. “But in broad terms, look at what he does and not what he says.”

What hap­pens with the na­tion­al debt

Trump likes to blame in­fla­tion on the na­tion­al debt, say­ing Biden’s poli­cies flood­ed the US econ­o­my with more mon­ey than it could ab­sorb. But about 22 per cent of the US$36 tril­lion out­stand­ing to­tal debt orig­i­nat­ed from the poli­cies of Trump’s first term, ac­cord­ing to the Com­mit­tee for a Re­spon­si­ble Fed­er­al Bud­get, a fis­cal watch­dog.

Paul Win­free, a for­mer Trump staffer who is now pres­i­dent and CEO of the Eco­nom­ic Pol­i­cy In­no­va­tion Cen­ter, warned in a re­cent analy­sis that the US is get­ting too close for com­fort to its fis­cal lim­its. His analy­sis sug­gests that if Trump can pre­serve 3 per cent growth he could ex­tend his ex­pir­ing 2017 tax cuts while keep­ing the debt suf­fi­cient­ly sta­ble by cut­ting spend­ing US$100 bil­lion to US$140 bil­lion a year.

The risk is that high­er bor­row­ing costs and debt can lim­it what Trump does while keep­ing bor­row­ing costs high for con­sumers. Law­mak­ers who once viewed the debt as prob­lem years away in­creas­ing­ly see it as some­thing to ad­dress now.

“One of the biggest vibe shifts I’m pick­ing up on now among pol­i­cy­mak­ers is they’re be­gin­ning to re­alise the long-term is to­day,” Win­free said.

Win­free said the key num­ber to watch is the in­ter­est rates charged on US debt — which will tell the pub­lic if in­vestors think the amount of bor­row­ing is prob­lem­at­ic. In­ter­est on the 10-year US Trea­sury note is at rough­ly 4.6 per cent, up a full per­cent­age point since Sep­tem­ber.

Im­mi­grants are still need­ed to fill jobs

Trump’s ex­ec­u­tive or­ders are a clear crack­down on im­mi­gra­tion — and that could be a drag on eco­nom­ic growth and cause month­ly job gains to slow. Trump of­ten frames im­mi­gra­tion as a crim­i­nal and na­tion­al se­cu­ri­ty is­sue by fo­cus­ing on peo­ple cross­ing the bor­der il­le­gal­ly.

But economies that can’t add enough work­ers are at risk of stag­nat­ing — and the US labour mar­ket at this stage needs im­mi­grants as part of the jobs mix. About 84% of Amer­i­ca’s net pop­u­la­tion growth last year came from im­mi­grants, ac­cord­ing to the Cen­sus Bu­reau. That’s 2.8 mil­lion im­mi­grants.

“They not on­ly work in the econ­o­my, but they spend in the econ­o­my,” said Satyam Pan­day, chief US econ­o­mist at S&P Glob­al Rat­ings. “Their spend­ing is some­body else’s in­come in the econ­o­my.”

If Trump were sim­ply to put im­mi­gra­tion back at his 2017 and 2019 av­er­ages of 750,000 im­mi­grants an­nu­al­ly, growth could slow from an es­ti­mat­ed 2.7% last year to 2% go­ing for­ward, Pan­day’s analy­sis found. The con­struc­tion, agri­cul­ture and leisure and hos­pi­tal­i­ty in­dus­tries would prob­a­bly strug­gle to find em­ploy­ees.

In oth­er words, it’s worth mon­i­tor­ing the month­ly jobs re­port and im­mi­gra­tion flows.

Mind the wealth gap

Trump is go­ing to have to fig­ure out how to bal­ance the in­ter­ests of bil­lion­aires with those of his blue- col­lar vot­ers. His in­au­gur­al events in­clud­ed sev­er­al of the world’s wealth­i­est men: Tes­la’s Elon Musk, Ama­zon’s Jeff Be­zos, Meta’s Mark Zucker­berg and LVMH’s Bernard Ar­nault. Each is worth rough­ly $200 bil­lion or more, ac­cord­ing to the Bloomberg Bil­lion­aire’s In­dex.

Scott El­lis, a mem­ber of the group Pa­tri­ot­ic Mil­lion­aires, said it’s worth mon­i­tor­ing just how much their wealth in­creas­es un­der Trump. This year, as of Fri­day, Ar­nault’s net worth has risen US$23 bil­lion, Be­zos is up by US$15 bil­lion, Zucker­berg is up by US$18 bil­lion and Musk’s wealth has risen by US$6 bil­lion. Those are all month­ly in­creas­es.

By con­trast, the most re­cent avail­able Cen­sus Bu­reau da­ta show that the me­di­an US house­hold wealth rose US$9,600 in 2021-2022, to US$176,500. (AP)