3 Ways the Trump Economy Will Affect You

He’s back.

DJT, of course—Mr. President, numbers 45 and now 47.

That election was nothing like I expected, to be honest. But as I noted in my dispatch on Tuesday, if we get a clear winner, and there are no lawsuits and shenanigans contesting the results, then the world will be a normal place.

And lo and behold: It’s like magic!

Wednesday was normal. No one contested the election. Markets were happy.

Stocks surged strongly on Wednesday… and bitcoin hit a new all-time high north of $75,000.

But beyond the immediacy of this post-election moment, we now have to look farther ahead. To Donald Trump’s collection of espoused policies, to determine what’s likely ahead for the economy and, thus, for investing.

My take: Trump will be great for dividend stocks.

But that’s because Trump will likely be bad for inflation… which means Trump and the Federal Reserve are on a collision course.

Trump has stated he loves low interest rates. Yet his policies, which I’ll detail in a moment, are clearly inflationary… which means the Fed, which just began lowering rates this fall, will very likely be back in a rate-hiking mood at some point next year, when the impact of Trumponomics takes hold.

Which is why dividend stocks are going to be the play in 2025.

So, about those policies…

The three I care most about, and which I will be watching intently in the new year are:

1. Deporting immigrants.
2. Cutting/eliminating taxes for various groups.
3. Imposing tariffs.

Let’s start with immigrants. And to be perfectly clear, I am not making any kind of comment on immigrants in the country. We are a nation born of immigrants, but I do understand the frustrations some Americans feel.

Beyond that, what would deporting millions of immigrants actually mean economically?

Well, to frame this point let me say that immigrants represented 18% of the US workforce in 2022, the latest data I’ve seen. Certainly, not all of them would be deported, but with more than 28 million immigrants working in the US, it’s fair to say Trump’s efforts, if they come to pass, will see US industries lose millions of workers.

Among the industries that would be pinched:

• Education and health services: 5.2 million immigrant workers.
• Construction: 3.3 million.
• Wholesale and retail trade: 3 million.
• Leisure and hospitality: 2.7 million.
• Agriculture, forestry, fishing: 468,000.

The last one—ag—seems like a funky outlier, but the reality is that America’s food sector employs about 2.4 million farmworkers, meaning immigrants represent about 20% of that workforce. Losing lots of those workers will have impacts on crop harvests, which will flow through food availability and, thus, grocery store prices.

That’s inflationary.

The same thesis holds true for all the other industries.

As immigrants vanish, the speed and cost of building a home will rise, since builders will be paying more to compete for available construction talent.

Restaurant kitchens will really suffer, which could see some eateries close. Others will be offering more money, maybe even signing bonuses to attract workers.

That’s all going to cause price rises…

Cutting/eliminating taxes on various groups is also inflationary.

First, it means more money in worker paychecks, which will go into increased consumption. More money in the system is inflationary.

Moreover, eliminating taxes on overtime and Social Security, as Trump has suggested, means less money going into the Social Security Trust Fund and into Medicare, which has long-range implications for the country and society.

But it also means increased federal debt to pay for Medicare services. And increased debt means more and more interest payments to service the debt, which means more borrowing. Already rates are going up on US debt, and they’ve been going up on consumer mortgages as well, as the bond market anticipates a Trump world that is, as I’m laying out, inflationary.

Finally, the tariffs.

I don’t care what Trump or anyone else says, tariffs are not borne by the exporting country or the exporting manufacturer. They’re borne by the importer and the end consumer, be it a business or you and me. That’s just the way the tariffs work. Period.

And it means inflation, since we’re talking about higher prices for all kinds of goods. Some will argue that tariffs will just lead to jobs coming back to the US. Maybe—to a degree. But three points:

• The US cannot produce every ingredient/part it needs for every consumer product. We have to import to keep production lines running.
• US companies that produce a competing product will, of course, raise their prices to just below the tariffed competitor, so prices will go up.
• US manufacturers have to pay more in salary than foreign firms, so prices for US-made goods will reflect higher US production costs.

And that all means… inflation.

Which brings me back to dividends, the real point of today’s dispatch.

As we go into 2025, the Fed is going to have to raise rates again to attack overheating prices.

That just means the cost of living is rising for the typical American family. And to offset that, investors will be snapping up high quality, dividend-paying stocks. They’ll want the big income to counteract the big pain of inflation raving their paycheck and their wallet.

Which is all part of the reason I’m putting together my new Passive Income event that I’ll be hosting very soon…

I’ve just finished building the portfolio for this, and it has 14 securities, yielding a combined 7% at the moment—a plump dividend stream. Moreover, half of the recommendations are tied to companies that have historically grown their dividends over time, meaning that as inflation picks up, the income these companies kick off should pick up too…

I’m gonna wrap this up by noting that this is not political commentary. It’s economic/investment commentary tied to a political event.

And in this case, that political event is very likely to lead to an inflationary surge in 2025… Meaning, now’s the time to lock-in fat dividends before the rest of the market starts racing into these shares too.