Can Trump really lower prices? Here's what his second term might mean for your wallet.

MW Can Trump really lower prices? Here's what his second term might mean for your wallet.

By Hannah Erin Lang, Venessa Wong, Aarthi Swaminathan, Zoe Han

The president-elect has pledged to lower prices, cut taxes and slap huge tariffs on imports. But don't plan on a quick fix for inflation, experts say.

It was the economy, stupid.

That's the message many pundits are taking away from Tuesday's election, in which former President Donald Trump handily defeated Vice President Kamala Harris with early victories in the swing states. Voters across the country broadly shifted right, apparently embracing the former businessman's pledge to fix what he called a "terrible economy."

As a candidate, the Republican nominee tapped into Americans' persistent frustration with a higher cost of living, blaming both President Joe Biden and a wave of new immigrants for postpandemic inflation that sent prices soaring on eggs, car insurance and more.

He falsely said the country was on the verge of a depression and made frequent promises that he said would ease economic pains, including carrying out mass deportations of immigrants, imposing sweeping tax cuts, capping credit-card interest rates and making car-loan interest payments tax deductible.

Trump's proposals could indeed have a massive impact - though some would actually raise costs for consumers. Whether he can bring them to fruition is yet to be determined: Republicans won control of the Senate, but as of Wednesday afternoon, control of the House remained undecided.

"Trump's victory could have a profound impact on consumer's wallets, but it is not at all clear what that will look like," said Matt Schulz, chief credit analyst at the loan-comparison site LendingTree (TREE).

The Trump campaign did not respond to a MarketWatch request for comment.

Here's how Trump's proposed policies could impact your wallet, according to the experts.

Read more: Opinion: How Trump's win could shake up taxes, jobs and interest rates - and what that means for your money

Trump will have a very limited ability to control prices

Trump pledged to bring down costs, speaking to many Americans' ongoing discontent with high prices despite a growing economy and low unemployment rate.

But don't expect prices across the economy to drop down to 2019 levels anytime soon, experts said - the economy just doesn't work that way.

"That would be a deflation level that would suggest something is very, very wrong with the economy," said Allison Schrager, an economist at the Manhattan Institute, a conservative think tank.

Trump will have a very limited ability to control price levels or the inflation rate, said Mark Hamrick, Washington bureau chief for the personal-finance site Bankrate - and that's true of all presidents.

"There is not a lever in the Oval Office to lower prices," Hamrick said. "If there were, all kinds of presidents would have pulled that, including Joe Biden."

The primary tool for moderating inflation is monetary policy, which is controlled by the Federal Reserve. The Federal Reserve historically makes those decisions independently, though the president picks the Fed chair.

Trump has criticized Federal Reserve Chair Jerome Powell and has said he wouldn't reappoint Powell to a third four-year term. Trump, during his first presidency, nominated Powell as chair in 2017.

Some of Trump's proposed policies could potentially raise people's living expenses, Hamrick added. He gave housing as one example, noting that mass deportations of immigrants could shrink the construction labor force, making it more expensive to build homes.

Interest rates on car loans and credit cards could stay higher for longer

A few of Trump's key policy proposals - specifically, mass deportation and large tariffs - would be inflationary. If the inflation rate, which measures how fast prices of goods and services increase over time, rose or remained above the Fed's target of 2%, policy makers at the central bank might have to keep interest rates higher for longer to rein in price increases.

That would keep interest payments on Americans' car loans, credit cards and other forms of credit from falling.

Trump has also proposed a temporary rate cap on credit cards, "which is highly unlikely to ever come to pass, despite massive support among the public," Schulz said.

From the archives (September 2024): Trump's cap for credit-card interest rates wouldn't pass Congress, analyst says

Trump promised lower mortgage rates, but presidents don't control rates

Mortgage rates have been rising over the last few weeks as the markets anticipated a Trump victory. Expect them to keep going up for the time being.

The average rate on a 30-year mortgage rose 9 basis points to 7.13% as of Wednesday, according to Mortgage News Daily.

Home buyers and sellers can expect more volatility in the housing market in the near term, Lisa Sturtevant, the chief economist at Bright MLS, said in a statement. Over the longer term, Trump's policies are also likely to make it harder for first-time buyers and middle-class Americans to afford homes, she added, because "his policies favor high-income individuals and existing homeowners."

See also: 6 ways a second Trump presidency will affect home buyers and sellers

And don't expect ultralow mortgage rates to make a comeback.

Even though Trump has promised that the 30-year mortgage rate would go back to 2% again under his watch, presidents do not control mortgage rates. The 30-year rate last averaged 2% in 2021.

In fact, it would take a major economic crash or another seismic event like the COVID-19 pandemic to bring mortgage rates down to that level once again, Mike Fratantoni, the chief economist at the Mortgage Bankers Association, told MarketWatch.

Trump also said during his campaign that there should be more presidential authority over the Federal Reserve, stating that the president "should have at least a say" on monetary policy.

Schulz said that would be "an enormous change" in the world of monetary policy making.

Trump will likely extend existing tax cuts

Trump will likely move to extend all of the 2017 tax cuts implemented during his previous administration under the Tax Cuts and Jobs Act. Those cuts were set to expire next year, and Trump's victory gives him a clear mandate to keep TCJA in place. If Republicans control the Senate and the House of Representatives, Trump may be able to expand TCJA.

To put it plainly: "Your taxes probably aren't going to go up in a Trump administration," Schrager said.

Trump has also mentioned making the interest car owners pay on their auto loans tax deductible, and eliminating taxes on tips and Social Security benefits, alongside other potential tax cuts. But the outcome of those proposals will depend on the makeup of Congress.

"Whether any of these proposals ever become reality is entirely unclear, but if they did, they could have very real impact," said Schulz, the LendingTree analyst.

See also: Trump has a 'super clear' mandate on taxes - but here's why it's not a done deal

Consumer protections could fade away

The second Trump administration is likely to take a more lenient approach to consumer protections.

Under President Joe Biden, the Consumer Financial Protection Bureau, the top federal consumer watchdog agency, moved to cap credit-card late fees, tried to more closely regulate buy-now-pay-later loans, and said it would probe "junk fees" home buyers pay when they close on a mortgage.

A second Trump term could weaken many of the consumer protections pushed forward by the Biden administration in the past four years.

"Given how inactive the CFPB was in [Trump's] previous administration, it is logical to assume that we'll see a similar hands-off approach the second time around," said Schulz.

That may mean that many of the CFPB's efforts during the Biden administration - including attempts to rein in junk fees, for example - could be undone, he said.

Conservatives have repeatedly called for the CFPB to be disbanded. The agency successfully fought off a legal challenge that argued that the way the CFPB is funded is unconstitutional.

Consumer advocates say they are worried about the CFPB's future under a second Trump administration, and how it will affect consumers.

"Scammers are smart; they move quickly," said Adam Rust, director of financial services at the Consumer Federation of America. "And this could be a great day for them."

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-Hannah Erin Lang -Venessa Wong -Aarthi Swaminathan -Zoe Han

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November 07, 2024 11:23 ET (16:23 GMT)

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