×

The trickle-down effects of Trumponomics

No matter where you stand politically, America's new president wants to put policies in place that are likely to have a major impact on taxes, regulation—and consumers' wallets.

President Donald Trump wants to spur economic growth by enacting a new tax plan that would reduce the current seven brackets down to three. When it comes to business, he wants to cut corporate tax rates from 35 percent to 15 percent.

On trade, President Trump has said on the campaign trail that the current deals are hurting American workers. He wants out of the Trans Pacific Partnership (TPP), which is a trade deal with Asia that has yet to be ratified. In addition, he wants to renegotiate the North American Free Trade Agreement (NAFTA), a deal enacted more than 2 decades ago with Canada and Mexico.

And with a Republican controlled House and Senate, it raises the question of how likely he'll be able to follow through on his campaign promises. Another open question is what impact those changes will have on individual consumers.

"He's going to start on the trade front and the immigration front with some of these executive orders," Politico's Senior Economic Correspondent Ben White told CNBC's "On the Money" in an interview.

"He'll start the process of building a wall with Mexico, he'll pull out of that TPP agreement right away, renegotiate NAFTA," White predicted. "The bigger ticket stuff, that's really going to impact Americans, that's going to take a longer period of time."


President Donald Trump gives a thumbs up on the West Front of the U.S. Capitol on January 20, 2017 in Washington, DC.
Getty Images
President Donald Trump gives a thumbs up on the West Front of the U.S. Capitol on January 20, 2017 in Washington, DC.

Sara Fagen, a former aide of former president George W. Bush, said he'll be able to act quickly on trade because he doesn't have to go through Congress.

"Quite a bit of trade can be done through executive action, particularly NAFTA," said Fagen. As for his tax plan, however, Trump and Republicans don't yet see eye to eye—which will mean delays.

"There is a big disagreement between House Republicans and the Trump administration on the border adjustment tax, which is the Republicans plan to tax imports, and that would raise prices on consumers," Fagen told CNBC.

She added that the Trump team knows the people who voted him into office are not going to like paying higher prices for essential items like gas, shoes, school supplies, that U.S. consumers typically import.

The hidden tax of tariffs

However, White said if we do get into a trade war with some of the countries President Trump has called unfair to the U.S. , and if tariffs are added, higher prices on goods are inevitable. For example, the next car a driver buys could cost more than they think, given the added costs that get passed on to consumers.

"If [automakers] are forced to pay tariffs to bring those cars into the U.S., that could make that market much less competitive for them. They could stop making those cars entirely," said White.

According to White, Trump will have to balance not starting a trade war, while at the same time incentivizing companies to manufacture in the United States.

As for deregulation, Trump has pledged to issue a moratorium on new agency regulations to give companies the certainty they need to reinvest, hire, and expand.

"I think it could have a huge impact on small businesses. Right now you see small business hiring fewer people because the cost to maintain an employee is high, and if he rolls those back, he's certainly able to hire more people which will be good for the economy," said Fagen.

On the Money airs on CNBC Saturdays at 5:30 am ET, or check listings for air times in local markets.