Trump 2.0 would unleash the very thing US voters have always feared

The former president is riding a populist wave driven by discontent over higher prices – yet his policies would only exacerbate them

The US economy grew solidly in the third quarter, ahead of the presidential election this Tuesday, continuing to outperform other major Western economies.
With consumer spending rising at its fastest pace in 18 months and inflation falling, the world’s biggest economy continues to ridicule those who’ve long predicted it will soon fall into recession.
American GDP increased at an annual rate of 2.8pc during the three months to September, according to advance estimates from the US Commerce Department, outpacing first quarter growth of 1.6pc but down slightly from a 3pc annualised expansion between April and June.
The UK, in contrast, grew just 0.7pc and 0.6pc during the first two quarters of this year – way behind the US.
Consumer spending was the biggest GDP driver, expanding 3.7pc in July to September, up from 2.8pc during the previous quarter and the biggest increase since early 2023.
Firms created almost a quarter of a million private sector jobs during the third quarter, with weekly unemployment benefit claims now at a five-month low.
As voters head for the polls on Nov 5, the latest data reflects the strongest pre-election US economy in decades. And the fact that consumer confidence just posted its largest monthly jump in over three years, suggests the good times are set to continue.
Yet voters seem reluctant to give President Joe Biden or presidential candidate Kamala Harris much credit.
Over recent months, the White House has stopped using the phrase “Bidenomics” – designed to convey the Democrat ticket of big infrastructure spending and “green jobs” – because Donald Trump has made the phrase synonymous with the cost of living crisis, an issue many Americans think will come back unless Trump returns to the White House.
US annual inflation hit a multi-decade high of 9.1pc in mid-2022 amidst lingering lockdown-related supply chain issues and spiralling commodity prices as Russia invaded Ukraine.
After multiple rate-rises by the Federal Reserve price pressures have eased markedly, with inflation down at 2.4pc in September. But prices are still 25pc higher on average compared to 2019, prior to the pandemic and during Trump’s presidency.
The Republican challenger has continually blamed Biden and the Democrats for high prices, exploiting the reality that inflation has most severely impacted low-income households.
While average hourly pay has increased 20pc since the end of lockdown, utility bills are 28pc higher and rents are up 30pc – both headings under which poor Americans spend a disproportionately large share of their incomes.
Trump has also focused on the high cost of petrol – some 30pc more expensive than in 2019 – another hugely significant price metric for those less well off.
Republicans are right to point out that, while the headline numbers look good, not everything is rosy in the Democrat’s economic garden.
An influential US manufacturing survey just hit a 16-month low, amidst the biggest loss of industrial jobs in any month since lockdown.
In mid-September, the Fed lowered interest rates for the first time in four years – by a whopping 50 basis points, saying it was increasingly confident that the inflation problem was easing.
Just a few days after US voters go to the polls, the US central bank looks set to cut rates again.
Yet since that September move, the US 10-year Treasury yield has risen by almost 50 basis points, belying central bank policymakers. Trump has used that to claim investors share his view that the Democrats have yet to tame inflation.
Harris and her entourage have tried countering that the markets fear the inflationary impact of a Trump presidency. It’s a claim that hasn’t stuck – in part because Trump is a more skilled campaigner, but also because Democrats have been loath to argue that financiers are now pricing in a Republican victory.
While he harks back to his own time in office, the reality is that the US economy grew on average by just 1.5pc a year between 2017 to 2021 when Trump was president, compared to 2.3pc from 2012 to 2017 during President Obama’s second term and 3.4pc since Biden became President in 2021.
Trump supporters would point out his term included the sharp Covid-driven downturn, while Biden presided over the lockdown-related bounce-back.
But it’s a testament to Trump’s success in pinning high inflation on Biden, Harris and the Democrats, that while Harris has partially closed the gap when voters are asked, “who do you trust to run the economy?”, polls show that Trump still has a clear lead.
At the time of writing, betting odds suggest Trump now has a 61pc chance of regaining the White House on Tuesday – although a close result, which seems likely, means a clear victor may not emerge for several days.
In terms of the economy, what would a Trump presidency look like?
The challenger says he would cut taxes for workers and small firms, and accelerate the shale revolution – “drill, baby drill” – that has helped drive down US electricity prices over recent years.
Yet the most disruptive move would be Trump’s plan to enact across-the-board tariffs on all imports – a move that would almost certainly make goods much costlier for US consumers, reigniting the very inflation he accuses Biden and Harris of causing.
Strong economies have historically favoured incumbent US political parties, helping them stay in power.
Yet here we are, with the economy buoyant, but Trump in pole position, riding a populist wave driven in large part by discontent over higher prices.
And that’s the irony ahead of this much-anticipated election. For if Trump wins, and unleashes a massive fiscal boost and big tariffs, the very US inflation that voters fear will surely surge anew.