With Economy Performing Exceptionally Well, Trump Has To Pick Stability Vs Reform

WASHINGTON, DC (Reuters) – As Donald Trump prepares to take office, he inherits an economy that’s performing exceptionally well, raising questions about the need for his aggressive policy agenda. With low unemployment, strong job growth, and inflation still lingering above the Federal Reserve’s 2% target, experts caution that drastic reforms could disrupt economic stability.

Mark Zandi, chief economist at Moody’s Analytics, advises that the administration’s success lies in avoiding harm to the thriving economy. Proposed tariffs, immigration curbs, and deficit-driven tax cuts could destabilize growth if pursued too aggressively.

Unlike his first term in 2017, when the economy was recovering from the 2008 crisis, Trump now faces tighter conditions. Inflation remains a concern, mortgage rates are nearing 7%, and government borrowing costs are climbing, reflecting market unease over fiscal discipline. Karen Dynan, a Harvard economist, notes that the rapid growth seen during President Biden’s term was bolstered by immigration—a factor Trump plans to restrict.

The U.S. economy is currently running beyond its potential, with December’s 4.1% unemployment rate and 256,000 new jobs signaling a tight labor market. Consumer spending remains robust, but additional stimulus risks reigniting inflation.

Federal Reserve Chair Jerome Powell emphasized the need for monetary policy to stay firm, balancing inflation control with job market stability. While Trump has created a Department of Government Efficiency to cut costs, no plans address the main deficit drivers: health and retirement benefits.

Trump’s expansive rhetoric contrasts with economic realities. Experts predict slower growth and potential disruptions from trade policies but acknowledge the administration could adjust if needed. As the foreign-born workforce share rises under Biden, immigration policy remains a contentious topic tied to economic growth and border control debates.