President Donald Trump is making a significant wager that his “America First” trade policy will rejuvenate the economy. However, experts caution that it’s a $1.4 trillion risk that could have severe repercussions, according to CNN. As Trump prepares to implement sweeping tariffs and challenge established trade agreements, the stakes for middle-class families are higher than ever.
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This article discusses five key factors that could change the economy under Trump and the American middle class, from rising grocery store prices to job losses.
1. Extension of the Tax Cuts and Jobs Act (TCJA)
The Tax Cuts and Jobs Act (TCJA) established in the year 2017 faces expiration at the deadline of 2025. The Congressional Budget Office reports the extension of tax cuts as desired by Republicans would last 10 years and generate $4.6 trillion in expenses.
President Trump upholds the complete implementation of TCJA provisions through perpetual maintenance of the 37% highest tax bracket. The Treasury Department reported that if the TCJA remains in effect for high-income households beyond $450,000, the wealthy would gain 45% of the total benefits. According to the same report, middle-class families would get saving benefits of only $1,300 yearly.
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2. Implementation of Sweeping Tariffs
According to the Centre for American Progress, President Trump’s tariffs could cost middle-class families $1,200 to $2,500 annually due to higher prices for groceries and appliances.
A Peterson Institute analysis of these tariffs function as regressive taxes, with the bottom 20% losing 5.7% of real income compared to 1.4% for the top 20%. The costs of Chinese retaliatory tariffs would have a negative impact on the prices of automobiles and grocery items.
The production costs for industries that depend on imports, including manufacturing and construction, would experience an increase. In his first term of presidency, Trump’s trade restrictions on steel and aluminum generated $2.2 billion in profits for domestic metal production, per official government report. The same imports subjected to these charges suffered $3.5 billion worth of reduced output.
The increased costs will create barriers to employment growth and wage increases within essential middle-class industries.
3. Immigration Restrictions and Mass Deportations
The action plan from Trump to deport 8 to 11 million immigrants living in the U.S. illegally will lead to a 6.4% decrease in the labor force, according to New American Economy research.
If implemented, the labor force reduction could deepen existing worker shortages in agriculture and construction, and healthcare sectors and increase prices for food and housing. The Peterson Institute predicts that deporting 8.3 million people would escalate prices throughout 2028 by 9.1%.
Middle-class families encounter difficulties paying rising costs for regular goods and services because of it. The cost of housing along with food serves to deplete the funds available in household budgets. Rising costs because of these developments would reduce middle-class financial stability.
4. Reduction in Labor Protections
Project 2025, endorsed by Trump allies, seeks to transform federal workers into “at-will” employees, thus affecting 2.2 million jobs based on Office of Personnel Management estimates. The policy is expected to diminish middle-class families’ guarantee of employment.
Rolling back overtime protections and workplace safety regulations could also suppress wages. For instance, the 2020 overtime rule under Trump excluded 8.2 million workers from coverage, which mainly impacted middle-income employees, according to EPI.
Organized labor sectors experience survival risks because Project 2025 wants to dissolve public employee unions and remove their protective policies. Experts from the American Federation of Teachers are concerned that proposed changes could lead to instability in collective bargaining rights. This instability may weaken their ability to enhance middle-class salaries by 10 to 20%.
5. Cuts to Safety Net Programs
The Republican Party has proposed cutting $2 trillion from federal spending for the TCJA extension. This would involve reducing funding for Medicaid, food stamps and housing assistance programs, according to a New York Times report.
Most of the population receiving safety net benefits belongs to working-class families, while proposed decreases could force millions to face life in poverty. An Associated Press article revealed that proposed 2018 SNAP modifications would evaporate food aid benefits for 3.1 million recipients, including middle-class Americans.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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This article originally appeared on GOBankingRates.com: 5 Factors That Could Change the Definition of Middle Class in a Trump Economy
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