Investing in Trump 2.0 (2025-2028): Recession Risks, Tariff Winners, 5 Smart Strategies for Wealth Growth
An investment strategy that considers Trump's economic planning and various future scenarios...
What’s going on with the U.S. economy under Trump 2.0? Nobody knows. Trump doesn’t even know. Trump’s team doesn’t have a coherent strategy.
Trump started a “trade war” thinking that other countries would bow down to his royal MAGA majesty, kiss the ring, and beg Sir Donald to work out a deal.
The reality? Other countries were like: Uhh WTF is this guy doing… let’s work out some deals with each other to keep our economies going and see if he eventually comes to his senses. If not, he can have fun with isolationism while we move on and gradually decouple to make the All-In podcast host’s “multipolar world” fantasy become a reality.
Is Trump negotiating deals (a la “Art of the Deal”) or imposing high tariffs to reshore manufacturing jobs? Or both? Or neither? Maybe if we review Trump’s horoscope and consult our local psychic we’ll know the answer. (It’s top secret.)
What do we know? We know that Trump has been obsessed with tariffs since the 1980s. In a recent interview:
“There’s a chance that the money from tariffs could be so great that it would replace it [income tax]. You know in the old days from about 1870 to 1913 the tariffs were the only form of money. And that’s when our nation was relatively the richest. We were the richest.”
It is clear that Trump views tariffs as an effective way to protect American industries, reduce trade deficits, and bring back manufacturing jobs to the U.S. — and he has an ultra-protectionist/isolationist stance re: trade and is anti-globalization.
Trump and his advisors have pointed to periods in U.S. history where high tariffs coincided with economic growth such as:
1. Gilded Age (1860s–1890s)
Trump’s Assumption: High tariffs caused massive U.S. industrial growth.
Economic Reality: Yes, tariffs (e.g., Morrill, McKinley) shielded fledgling industries. But core drivers were:
Westward expansion (new markets, land, agriculture)
Mass immigration (cheap labor force)
Natural resources (coal, timber, iron)
Tech breakthroughs (railroads, telegraph, mechanized production)
Urbanization & capital investment
Tariff Role: Possibly helped specific industries temporarily, but not the primary cause of macroeconomic growth.
Causality Verdict: ⚠️ Weak-to-Moderate Causation
Tariffs contributed to some industrial insulation but were not the engine of U.S. growth.
2. Early 20th Century (1900–1920s)
Trump’s Assumption: U.S. prosperity in the 1920s happened under high tariffs → proof they work.
Economic Reality: Fordney-McCumber Tariff (1922) did exist, but U.S. growth was fueled by:
Mass electrification and automation
Post-WWI industrial dominance
Consumer credit & durable goods boom
Rising productivity & consumer demand
Tariffs began to hurt international trade.
Ended in disaster: Smoot-Hawley Tariff (1930) → triggered global retaliation and deepened Great Depression.
Tariff Role: Neutral to negative by late 1920s.
Causality Verdict: ❌ No Positive Causation
Tariffs did not drive the 1920s boom. In fact, they likely harmed the economy by the decade's end.
3. Post-WWII Boom (1945–1973)
Trump’s Likely Belief (Implied, Not Explicit): The U.S. was dominant during this era because it controlled trade and protected industries.
Economic Reality: This was the era of lower tariffs under Bretton Woods, GATT. Growth was fueled by:
Pent-up consumer demand after WWII
Global destruction of competitors (Europe, Japan)
High U.S. manufacturing base and productivity
GI Bill, highway expansion, R&D, baby boom
Tariff Role: Falling, not rising. U.S. actively pushed for free trade.
Causality Verdict: ❌ Inverse Causation
Growth happened despite, not because of, protectionism. Tariffs fell and U.S. still boomed.
4. 1980s–1990s (Trump’s Formative Era)
Trump’s Assumption: U.S. decline = Japan & China "ripping us off" → we needed tariffs.
Economic Reality: Japan’s trade dominance stung U.S. industries (esp. autos), but:
The U.S. remained the dominant economy.
U.S. shifted toward services, finance, and tech.
NAFTA (1994) and WTO began pushing global trade integration.
Consumer prices dropped due to global supply chains.
Tariff Role: Mostly falling or selectively used (e.g., Reagan on motorcycles for Harley-Davidson).
Causality Verdict: ❌ Misdiagnosed Correlation
Japan’s success didn’t “cause” U.S. decline. It coincided with industrial shifts and offshoring. Tariffs would not have reversed macro trends.
5. Trump Era (2017–2020)
Trump’s Assumption: Tariffs on China, steel, aluminum = job protection, fairer trade, GDP growth.
Economic Reality: Tariffs caused:
$40 billion in annual consumer costs (NBER)
Trade disruption in agriculture and manufacturing
Mixed or limited job gains in protected sectors
GDP did not accelerate; growth stayed around 2–3% before COVID.
Tariff Role: Politically powerful, economically modest or negative.
Causality Verdict: ❌ False Causation
No meaningful macroeconomic gains tied to tariffs; side effects were more negative than positive.
Trump and his team likely conflate “tariffs” with rapid periods of economic growth historically, however, there’s zero evidence that tariffs were the primary driver of growth for the U.S. — and in many cases the U.S. grew in spite of tariffs (such that growth would’ve been superior without them).
I should emphasize that I am NOT knee-jerk against tariffs. Tariffs can incentivize critical domestic industry for the sake of national security & American interests — assuming you think this is 100% necessary.
Tariffs can also be used strategically as a tit-for-tat mechanism to incentivize free trade (i.e. tariff other countries equal to what they tariff you to incentivize them to drop tariffs and make markets freer). Tariffs will not somehow create zillions of manufacturing jobs though. (Read: Trump Tariffs & U.S. Manufacturing Jobs)
But the Trump team thinks tariffs are amazing and nearly all of them are on board with Trump’s pet tariff idea… he selected them based on whether they would be.
It’s like finding the few medical doctors who think that vaccines cause autism, GMOs are dangerous, 5G is causing brain cancer, ivermectin cures COVID, seed oils are the hidden cause of obesity, and the government is running covert chem-trail operations to poison the skies — and installing them in key positions within your cabinet.
Anyone who disagrees? Must be affiliated with CNN and/or the Deep State. It’s about time we’re draining the swamp!
We know the full MAGAnomics cartel for 2025…
Trump: Wants tariffs. Logic: When U.S. had tariffs in the past they grew rapidly, were prosperous, and became dominant. Even if this is correlation? In Trump’s mind it’s 100% causation. MAGA King Trump demands his tariffs.
Howard Lutnick: Trump’s media pitbull doing his daily propaganda rounds on major business networks. He’s hyping up Trump’s policy like North Korean henchmen hype up rocketman Kim Jong Un. Most Americans perceive Lutnick as a blowhard… no matter how much you hype MAGAnomics — money talks, bullshit walks. People can see market reactions.
Scott Bessent: Likely the closest thing to an adult-with-commonsense in the room within the Trump economic team. Likely wasn’t fully on board with Lutnick, Navarro, and/or Miran — but he’s gotta do his best to navigate what the Trump admin has thrown his way. Allegedly pushed for the 90 day tariff pause.
Stephen Miran: Chair of the Council of Economic Advisors who provides an intellectual framework for Trump’s trade policies. His 2024 paper: “A User’s Guide to Restructuring the Global Trading System” outlines his vision. He wants to revive manufacturing, more global burden sharing, and currency adjustment (weakening of the dollar). Many argue he has serious conflicts of interests via Amberwave Partners — which has large stakes in many domestic companies which will benefit from Trump’s potential industrial reshoring.
Ron Vera: The man, the myth, the legend. He also goes by Peter Navarro but prefers Ron Vera. Wants: permanent trade barriers for the U.S., to confront China aggressively, to eliminate free trade agreements, to boost self-sufficiency, and to ignore economic consensus.
Alright so how can you strategically invest under Trump 2.0’s economic chaos from 2025-2029?
This specific piece analyzes Trump and his economic team’s goals, behaviors from inauguration to present (April 2025), tariffs, U.S. Treasury activity, economic indicators, geopolitical reactions (e.g. EU, China, Canada, Japan, Taiwan, etc.) — and the big picture synergy — then highlights specific investment strategies based on risk-tolerance under Trump 2.0.
Related: Pre-Trump Inauguration Top 10 Best vs. Worst Investments (Predictions)
U.S. Political & Economic Landscape (April 2025)
Trump assumed office for a second term with an aggressive “America First” economic agenda. Key allies were placed in top positions to drive this platform.
Howard Lutnick – Commerce Secretary
Howard Lutnick, a Wall Street CEO turned Commerce Secretary, became a vocal champion of Trump’s trade and tax plans. He echoed Trump’s call for “reciprocal” tariffs – matching foreign import taxes with equal U.S. tariffs – and fully embraced using tariffs as a tool to rebuild American industry.
Lutnick also supported Trump’s ambitious tax overhaul, including a proposal to abolish federal income taxes for most Americans (those earning under $150,000 annually). In media interviews, Lutnick explained that Trump aims to replace the IRS with an “External Revenue Service” that would tax foreign countries instead of U.S. citizens.
This vision reflects Trump’s broader plan to:
Fund the federal government primarily through tariffs and foreign payments
Enable sweeping domestic tax cuts, including:
Elimination of income taxes for most Americans
Removal of taxes on tips, overtime pay, and even Social Security benefits
Scott Bessent – Treasury Secretary
Scott Bessent, a hedge fund veteran, was appointed Treasury Secretary and is responsible for managing fiscal and market stability amid these aggressive policy changes.
Bessent has warned of potential instability, acknowledging that there are “no guarantees” the U.S. can avoid a recession—though he believes a full-blown financial crisis is unlikely.
His top priority is to tame Treasury bond yields in order to contain U.S. borrowing costs—arguably placing more emphasis on debt markets than on stock market performance.
This marks a notable shift from Trump’s first term, during which he focused obsessively on stock indices. Now, rising interest rates and the $36+ trillion national debt have redirected the administration’s attention to the bond market.
Bessent’s key objectives include:
Driving down the 10-year Treasury yield
Using lower long-term rates to cushion the economy against trade-related volatility
Reducing the cost of servicing the national debt
However, early efforts proved difficult. Despite:
A sharp stock selloff
Growing expectations of Federal Reserve rate cuts
...the 10-year Treasury yield surged back above pre-crisis levels by April 2025, highlighting persistent concerns among bond investors and complicating Bessent’s stabilization efforts.
Peter Navarro – Trade and Security Strategy
Peter Navarro, Trump’s hardline trade advisor from his first term, returned in 2025 to help orchestrate the new tariff strategy.
As a chief architect of Trump’s trade wars, Navarro framed tariffs as serving both economic and national security imperatives.
When Trump rolled out sweeping new tariffs in 2025, Navarro provided detailed justifications:
Energy imports from Canada were hit with a lower 10% tariff (compared to 25% on other goods) to “minimize disruptive effects” on U.S. energy prices.
Navarro publicly linked tariffs to anti-drug efforts, claiming that trade penalties on China, Mexico, and Canada would pressure those governments to crack down on the illicit fentanyl trade fueling the U.S. opioid crisis.
This approach fused trade policy with national security objectives, creating a rationale for unprecedented tariff levels.
February 1, 2025 – Executive Orders on Tariffs
On February 1, 2025, Trump signed a series of executive orders that implemented the most aggressive tariffs of his presidency:
25% tariffs on all imports from Mexico and Canada
10% tariffs on all imports from China
Oil, gas, and electricity from Canada were assigned the 10% rate, specifically to soften the impact of an oil shock
These tariffs were set to take effect within days.
Navarro’s influence was clearly reflected in:
The severity of the tariffs
The integration of security and drug enforcement rhetoric into trade policy
The inclusion of escalation clauses, allowing tariffs to increase automatically if U.S. trade partners retaliated
This marked a major escalation of Trump’s protectionist agenda, with Navarro as one of its most vocal and strategic drivers.
Stephen Miran – Council of Economic Advisers Chairman
Stephen Miran, appointed Chairman of the Council of Economic Advisers in 2025, plays a critical role in shaping and validating Trump’s economic strategy.
A former Treasury advisor and hedge fund economist, Miran brings a technocratic approach to the administration’s more aggressive economic agenda, offering rigorous analysis to support Trump’s sweeping tariff, tax, and deregulation policies.
Miran’s office is responsible for modeling the economic impact of Trump’s 2025 tariffs—including 25% levies on Mexico and Canada and 10% on China—focusing on how they affect domestic industry, consumer prices, and inflation.
His team is also developing projections to test the fiscal viability of replacing income taxes with tariff-generated revenue, a core plank of Trump’s proposed “External Revenue Service.”
While Scott Bessent works to manage bond yields, Miran is focused on maintaining macroeconomic balance: supporting industrial growth while mitigating inflation and ensuring the U.S. doesn’t lose market confidence.
By April 2025, this balancing act became increasingly difficult. Treasury yields had climbed above pre-crisis levels despite Federal Reserve rate cut expectations, signaling market skepticism about the administration’s policies.
In response, Miran led efforts to:
Publish internal models linking tariff revenue to Trump’s tax cut feasibility,
Advocate deregulation in manufacturing and energy to blunt cost pressures,
Coordinate with Navarro on escalation clauses that pressure foreign compliance without stalling U.S. momentum.
Miran’s influence is evident in the administration’s attempt to frame tariffs not just as protectionist measures, but as dual-purpose tools: stimulating domestic output while funding tax cuts. His measured, analytical role serves as a stabilizing force amid the administration’s more ideological players.
Early Policy Moves & Reversals (2025: Q1/Q2)
Trump’s second term began with a flurry of executive actions aimed at fulfilling campaign promises. Economically, the most seismic moves centered on trade. By early March 2025, the administration had effectively launched a multi-front trade war.
When Mexico and Canada initially resisted Trump’s tariffs, he temporarily paused implementation for 30 days in an attempt to gain cooperation—especially on border security and drug enforcement.
However, negotiations yielded only partial concessions. On March 4, 2025, the U.S. moved forward with 25% import duties on Canada and Mexico and expanded tariffs on Chinese goods. The retaliation from key trade partners was immediate.
Canada’s Prime Minister denounced the move as “a very dumb thing to do” and imposed 25% counter-tariffs on C$30 billion of U.S. exports, targeting politically sensitive products like orange juice, peanut butter, and motorcycles.
China responded with 10–15% tariffs on U.S. goods, implemented new export restrictions, and filed formal complaints at the WTO.
The fallout was swift. U.S. stocks sold off globally, wiping out trillions in market value, as investors fled risky assets in fear of escalating trade disruptions.
Despite the market turmoil, Trump remained publicly defiant. In a televised address to Congress, he defended the tariffs as necessary correction for decades of trade imbalances. He cited India, South Korea, China, and the EU as persistent abusers of the global trade system, proclaiming that now “it’s our turn.”
Trump announced that April 2 would mark “Liberation Day,” a major escalation in the tariff war. (Read: Trump’s Liberation Day Tariffs.) On that day, he unveiled a baseline 10% tariff on all imports into the United States, with even higher rates—reportedly up to 20%—on 57 specific trading partners. This sweeping move effectively taxed nearly every foreign product entering the country.
The global reaction was severe:
EU leaders called it a “major blow to the world economy” and began preparing retaliatory tariffs on tens of billions of dollars of U.S. goods.
American businesses and consumers braced for broad price increases across essential goods and manufacturing inputs.
However, the economic shockwaves soon forced partial reversals. The combination of a stock market crash and a Treasury bond sell-off in early April alarmed financial analysts and Trump’s own economic team.
U.S. 10-year Treasury yields surged from under 4% to over 4.5% almost overnight.
30-year yields surpassed 5%, significantly raising borrowing costs across the economy.
Analysts warned of stagflation or even a debt crisis, as falling equities coincided with a bond rout—“the last thing America needed,” one report noted. (Read: Trump Tariffs Won’t Fix the U.S. Debt Crisis)
Faced with escalating risks, the White House moved to partly walk back the April 2 tariff plan:
On April 9, the administration announced a 90-day pause on implementing the universal tariff.
It also reduced the planned EU tariff from 20% to 10%, signaling an openness to diplomacy.
These concessions helped cool tensions. In response, the EU paused its planned retaliatory tariffs, giving room for negotiations.
Administration officials scrambled to stabilize markets and clarify the path forward:
Commerce Secretary Lutnick stated that the announced tariffs represented maximums, and that they could be modified through trade talks. He hinted that U.S. companies complying with rules—such as USMCA content requirements—might be exempted from the most severe measures.
Treasury Secretary Bessent pointed to a successful 10-year Treasury auction during the chaos as evidence that demand for U.S. debt remained intact, at least for the time being.
These tactical retreats and public reassurances were intended to signal flexibility and prevent a full-scale investor panic. After taking the global economy to the brink of a trade meltdown, the administration showed its first signs of a more measured, reactive posture—at least temporarily.
Political Dynamics & Public Response
Domestically, Trump’s forceful actions have triggered mixed political reactions.
Upon taking office in January 2025, his approval rating stood in the mid-40% range—historically low for an incoming president.
Nevertheless, early February polling showed a slim majority of Americans describing him as “tough,” “focused,” and “doing what he promised,” even if many did not approve of the specific actions taken. Support was particularly strong for his hardline immigration stance and the energetic pace of executive action.
However, by late February and into March, public sentiment began to shift. As economic turbulence set in, a majority of Americans came to believe that Trump had overstepped his authority and, notably, “hadn’t done enough to address high prices.”
The growing perception that tariffs and economic upheaval were driving up the cost of living led to declining support. Within his first month, Trump’s approval rating fell below his disapproval, marking an inflection point in public opinion.
Several high-profile decisions fueled the backlash beyond his core base:
Mass firings of federal officials
Elon Musk’s “DOGE”
Pardons for January 6 figures
These moves alienated moderates and independents, raising concerns that the administration was prioritizing ideological agendas over economic stability.
By April 2025, with markets in disarray and tariff-driven inflation building, Trump faced mounting political risk. His bold economic nationalism was beginning to alienate independent voters and pragmatic Republicans concerned about their household finances.
Strategic Vision vs. Political Headwinds
Trump’s second term started with dramatic policy swings: aggressive tariffs, rapid regulatory rollbacks, and tax cut promises—followed by partial retreats in the face of market reactions.
His loyal inner circle, including Howard Lutnick (trade and tax), Scott Bessent (finance), Peter Navarro (industrial policy), and Jeff Rollins (agriculture), are executing a high-risk economic strategy aimed at re-shoring critical industries like steel, aluminum, autos, semiconductors, pharmaceuticals, and lumber.
Their goal: to restore U.S. industrial self-sufficiency, regardless of near-term economic pain.
As Lutnick put it, “National security rises above all.”
The administration argues that a more resilient domestic manufacturing base is worth enduring short-term economic discomfort, including a possible mild recession, if it leads to long-term independence from foreign supply chains.
International Repercussions & Rising Tensions
Markets and foreign governments have not shared the administration’s confidence. The global response has ranged from concern to active retaliation.
Major U.S. allies, including Canada, the EU, and Japan, have begun coordinating countermeasures, while working to stabilize global financial markets.
Notably, during the early April bond market rout, the U.S. abstained from G7 calming measures, leaving other nations to step in unilaterally.
Tensions with China have intensified even further. In a sharp escalation, the Chinese government declared:
“If war is what the U.S. wants… we’re ready to fight till the end.”
This rhetoric frames the trade confrontation not as a transient dispute, but as a long-term geopolitical conflict.
A Volatile Road Ahead
Trump now faces a volatile interplay between domestic politics and global economic fallout. He must balance declining approval ratings and mounting electoral pressure with his desire to leave a transformative legacy.
While his administration remains committed to the reshoring agenda, the political reality may force course corrections if markets falter or inflation worsens.
The specter of deeper economic pain—or even impeachment, should the opposition regain power—looms as a possible consequence if the strategy backfires.
Trump’s second term will likely hinge on his ability to adjust tactics without abandoning core goals, navigating between populist disruption and economic sustainability.
Economic Forecasts: 2025–2028 (Trump 2.0)
Projecting how the economy will likely react under Trump 2.0 — year-by-year.
1.) 2025: Turbulence & Adjustment
The remainder of 2025 is likely to be marked by significant economic turbulence as the consequences of Trump’s early-term policies ripple through the system.
The year began with the U.S. economy on shaky ground: inflation had declined from 2022’s 40-year highs to around 2.2–2.4%, while unemployment had risen to approximately 4.4% by inauguration, reflecting a late-2024 growth slowdown.
Trump’s aggressive tariff regime has added fresh headwinds. As higher import prices begin working their way through supply chains, mid-2025 is expected to bring renewed inflation—raising costs on everything from consumer goods to industrial components and commodities.
At the same time, the hit to business confidence and investment is likely to drag on demand, creating the risk of stagflation: a toxic mix of slower growth and rising prices. Even Trump and Treasury Secretary Scott Bessent have admitted that a recession is a real possibility.
Financial markets have already begun flashing warning signals. In Q1 2025, the S&P 500 fell roughly 17% between late 2024 and early April 2025, erasing nearly $9 trillion in market capitalization. Meanwhile, bond yields surged, with the 10-year Treasury rate climbing above 4.5%, indicating that investors are anticipating slower growth, higher inflation, and increased borrowing needs ahead.
Monetary Response: Federal Reserve Under Pressure
In this environment, the Federal Reserve is likely to pivot to a more dovish stance. Fed Chair Jerome Powell, under pressure from Trump to cut interest rates as the trade war escalated, may respond to growing signs of recession by easing policy later in 2025.
If tariff-driven inflation doesn’t spiral out of control, the Fed could justify rate cuts to stabilize the economy.
By April 2025, markets had already priced in aggressive expectations of rate cuts, signaling a belief that the Fed will act to counteract the drag from tariffs. Lower interest rates would help stimulate housing and auto demand, ease corporate borrowing costs, and alleviate pressure in the bond market.
Fiscal Policy: Stimulus, Cuts, Contradictions
On the fiscal side, Trump and congressional Republicans are expected to push for major tax cuts, even as they talk about balancing the budget.
The contradiction is resolved through their strategy: use tariffs to generate federal revenue, effectively shifting the tax burden to foreign exporters, while cutting domestic income and business taxes to spur growth.
A major tax bill is anticipated in 2025—potentially a "Trump Tax Cuts 2.0" package. This could include:
Making the 2017 tax cuts permanent (set to expire in 2025),
Implementing a zero income tax for most households earning under $150,000,
Expanding investment-related tax breaks.
These policies would likely stimulate short-term consumer spending and capital investment, partially offsetting trade-related economic drag.
However, the revenue loss is expected to total trillions over a decade, raising serious concerns about deficit expansion.
Despite promises to cut waste, Trump’s early fiscal actions—including a continuing resolution to fund government and vague plans for spending cuts—suggest the deficit will remain elevated.
The bond market's negative reaction in April reflected fears that Trump’s combination of tariffs, tax cuts, and borrowing could undermine U.S. financial credibility.
Outlook: Volatility, Retaliation, Selective Retreats
For the rest of 2025, expect elevated volatility in markets and policy. There may be periods of relief if trade deals are struck or new stimulus is announced, followed by renewed shocks if more tariffs or foreign retaliation emerge.
Growth is expected to slow sharply by Q3 and Q4. Some forecasts project zero or negative GDP growth by year-end, effectively a mild recession. Unemployment, which began the year around 4.4%, could rise above 5% by late 2025 as export-oriented and import-dependent sectors like manufacturing, agriculture, and retail cut jobs.
Toward the end of the year, Trump may moderate his stance to stabilize the economy and position for political gains:
Finalizing limited trade deals or offering tariff exemptions
Increasing farm subsidies and expanding domestic oil and gas production
Announcing infrastructure investments in key battleground states
These adjustments could help lift sentiment ahead of the holiday season and contain the damage from earlier confrontations.
2025 is shaping up as a year of economic adjustment. Trump’s disruption campaign—rooted in economic nationalism and tariff escalation—has introduced major volatility. As the system absorbs the initial shock, the administration may shift from full-scale confrontation to a strategy of selective compromise, in an effort to avoid a broader economic or political crisis heading into 2026.
2.) 2026: Inflection Point & Electoral Pressure
By 2026, the Trump administration will be under mounting pressure to show tangible economic results. If a recession begins in late 2025, it could extend into the first half of 2026.
Trump’s economic team will be counting on a combination of Federal Reserve rate cuts—potentially starting in late 2025—and the large tax cuts (likely taking effect for the 2026 tax year) to spark a rebound by mid-year.
A plausible scenario is that, after two or three quarters of contraction, the U.S. economy begins to recover due to easy monetary policy and stimulus-fueled consumer spending.
If tariff-driven inflation fades—either from expanded domestic production or reconfigured supply chains—households could experience relief. With lower prices and more money in their pockets from tax cuts, spending might pick up.
This would give Trump the opportunity to claim vindication: short-term pain leading to a restored manufacturing base and economic momentum ahead of the 2026 midterm elections.
Downside Risks: Political & Economic Fallout
The alternative scenario is more precarious. If the trade war drags on without clear gains and the economy remains weak, 2026 could become a year of political backlash. Rising unemployment or persistently high inflation—especially if tariffs continue to drive up consumer prices—could send Trump’s approval ratings even lower.
In such a case, the midterm elections in November 2026 could bring major losses for Republicans. Democrats—and potentially anti-Trump Republicans—may gain control of one or both chambers of Congress.
A Democratic House would likely:
Launch investigations into Trump’s economic policies
Issue subpoenas and conduct oversight hearings
Possibly pursue impeachment, especially if evidence emerges of misconduct or overreach
Even absent a specific “high crime,” Democrats might attempt impeachment over alleged abuse of power, such as illegal spending practices or the firing of inspectors general.
While removal from office would remain unlikely without a supermajority in the Senate, the process itself would absorb political capital and rattle markets.
Policy Implications of a Power Shift
A Democratic or divided Congress in 2026 would almost certainly stall Trump’s legislative agenda. Existing tariffs implemented through executive authority (under Section 301, Section 232, etc.) could face bipartisan scrutiny.
Lawmakers may introduce bills to:
Reclaim congressional authority over trade
Mandate economic impact analyses of ongoing tariff policies
If economic pain is widespread, even some Republicans may break ranks to push for de-escalation. The administration could be pressured to finalize limited trade agreements—for example, a revised USMCA or a deal with the EU—to remove certain tariffs in exchange for strategic concessions.
A major milestone will be the scheduled 2026 renegotiation of USMCA clauses. Trump could threaten a full withdrawal if his terms aren’t met, but more likely is a hardline renegotiation yielding a renewed agreement with stricter rules of origin, drug enforcement, or other symbolic wins that allow all parties to claim success.
Momentum Scenario: Continued Aggression if Economy Recovers
If instead the economy rebounds and Republicans retain control of Congress, Trump will likely double down on his economic agenda.
This could include:
Increasing tariffs on countries such as Taiwan, Japan, or EU members — particularly in sectors with persistent trade imbalances
Introducing currency-manipulation tariffs or immigration-linked trade penalties
Expanding industrial policy with targeted subsidies or deeper investment-focused tax cuts
The Federal Reserve’s independence could also be tested. With 2 board vacancies by 2026, Trump could appoint loyalists aligned with his growth-first philosophy.
Fed Chair Jerome Powell’s term ends mid-year, and Trump is expected to appoint a successor more favorable to low rates and debt monetization.
A compliant Fed might be more willing to:
Keep rates low despite inflation risk
Use unorthodox tools to support the Treasury market
Help suppress bond yields, preventing fiscal strain from rising debt costs
Global Realignment: Trade Blocs & Strategic Decoupling
Internationally, 2026 will see accelerated global adaptation to Trump’s trade policies. As U.S. protectionism persists:
The EU may strike more free trade deals with Asia or Latin America to diversify away from the U.S.
China is expected to deepen trade ties within the RCEP bloc and focus on its domestic market
The CPTPP will likely continue without U.S. involvement, isolating American exporters
These moves will shift global supply chains. U.S. companies may respond by:
Building production facilities in tariff-exempt countries
Transshipping goods through third-party nations—though Trump’s customs enforcement will attempt to clamp down on this behavior
By late 2026, the picture will become clearer: either the “Trump trade shock” will have produced a new equilibrium with reshored industries and narrowed trade deficits, or it will have simply reduced global trade volumes—leaving growth weaker and the U.S. debt market strained.
If foreign central banks—especially China’s—begin reducing purchases of U.S. Treasurys as a countermeasure, interest rates could remain elevated, undermining recovery efforts and amplifying fiscal pressure.
3.) 2027: Navigating Recovery vs. Stagflation
The year 2027 is likely to mark a critical turning point, where the Trump administration either begins to reap the benefits of its protectionist policies or sees the full costs crystallize.
In the optimistic scenario, by 2027 the U.S. could be entering a real economic upswing. The tariff shock would be two years old, giving businesses time to adapt and shift supply chains.
Some new domestic production capacity—such as semiconductor fabs subsidized by the 2022 CHIPS Act and shielded by tariffs—could be fully operational, reducing reliance on Asian supply.
New steel mills and aluminum smelters encouraged by import taxes may be employing U.S. workers. If Trump’s strategy of focusing on five key sectors—steel, autos, microchips, pharmaceuticals, and lumber—has succeeded, those industries could be growing by 2027, especially in the Rust Belt and other manufacturing regions.
This targeted growth could result in above-trend GDP expansion in select sectors, even if overall GDP remains modest. Trump would likely brand this as a “Manufacturing Renaissance.”
Unemployment could stabilize in the 4–5% range, and if capacity expansion keeps pace with demand, inflation could ease—or even undershoot targets, especially if global overcapacity pushes prices down.
Divided Government & Selective Trade De-escalation
If Republicans lost one or both chambers in the 2026 midterms, Washington may enter a phase of divided government. Major new initiatives would be unlikely.
Instead, 2027 would shift toward policy maintenance and trade negotiations. A Democratic-controlled House could push Trump to unwind the most politically unpopular aspects of his trade agenda, especially if consumer inflation remains a key issue.
Congress might attach tariff repeal measures to must-pass bills like the budget or debt ceiling. While Trump may resist, electoral pressure ahead of 2028 could lead him to compromise.
In this case, the administration might initiate a partial unwinding of the trade war, reducing certain tariffs in exchange for symbolic foreign concessions—such as China increasing U.S. imports, or the EU reducing tariffs on U.S. goods.
The administration would likely reframe this pivot as a strategic evolution—from “trade war” to “trade deals”—arguing that Trump’s tough stance forced international partners to the table. In practice, many of these deals may simply reinstate prior trade norms with cosmetic changes.
Tariffs on U.S. allies—Canada, Mexico, and potentially the EU—could be lifted if progress is made on auxiliary issues like drug enforcement, defense spending, or digital trade rules, which Trump often ties into broader negotiations. The easing of these tariffs could alleviate some inflation and contribute to a late-term recovery.
Pessimistic Scenario: Persistent Stagflation & Policy Strain
Alternatively, 2027 could be marked by entrenched stagflation. If the trade war remains unresolved and global retaliation continues, high import costs and supply bottlenecks could persist, keeping inflation stuck around 4–5%. At the same time, economic growth could remain sluggish, with businesses hesitant to invest amid unpredictable policy shifts and weak consumer confidence.
In this environment, the Federal Reserve, possibly under new Trump-appointed leadership, may have cut interest rates to near zero in an effort to revive growth. If conventional tools fail, the Fed could resort to unconventional policies such as yield curve control to suppress long-term borrowing costs—particularly if bond markets remain volatile or distrustful of fiscal sustainability.
However, easy monetary policy combined with trade restrictions might prove counterproductive. A weakening dollar, persistent inflation, and a stagnant economy could feed public discontent. After years of tax cuts, stimulus, and recession-driven deficits, the federal debt could approach or surpass $40 trillion. If investors begin to demand a risk premium for holding U.S. debt, borrowing costs could remain elevated, even in a weak economy.
Bond markets may no longer function as a safe haven. As noted during the April 2025 Treasury selloff, even with a 17% stock drop and signs of recession, 10-year Treasury yields barely moved, reflecting investor skepticism rather than confidence. If that dynamic holds into 2027, the U.S. could face a debt financing crunch.
Trump may be forced to consider unpopular measures—spending cuts, including to programs he vowed to protect, or even targeted tax hikes—to stabilize the bond market. More likely, he would pressure the Fed to aggressively suppress interest rates, even at the risk of fueling long-term inflation, to protect his fiscal agenda and preserve financial stability.
Global Trade Realignment & U.S. Isolation
By 2027, the world may have significantly reoriented its trade strategy in response to U.S. protectionism. Major economies will have adapted:
China may have doubled down on its state-led economic model, stimulated domestic demand, and built new trade relationships across Asia, Africa, and Latin America.
Europe could be relying more on alternative supply chains—sourcing soybeans from Brazil or machinery from Japan—and implementing its anti-coercion tools to push back on U.S. trade pressure.
The CPTPP and RCEP blocs may be more active than ever, excluding the U.S., which has refused to rejoin.
If Trump’s tariffs persist, WTO authority could be eroded, further fracturing the global trade order. In this fragmented landscape, global growth may slow, and U.S. exporters could permanently lose market share.
Some U.S. firms may shift production to tariff-exempt countries or engage in transshipment to avoid penalties—though increased enforcement from Trump’s customs apparatus will likely target these tactics. Even if trade deals are later restored, much of the lost business abroad may not return.
The combination of prolonged tariffs, weakened global institutions, and higher debt servicing costs could leave the U.S. economy burdened with slower long-term growth, even if some reshoring successes exist domestically.
4.) 2028: Climax of Trump’s Second Term
In 2028, Trump will be in the final year of his presidency and focused on cementing his legacy, as well as shaping the election of a preferred successor. The economic landscape at this point will heavily reflect the results of policies implemented during the prior three years.
In a stabilization scenario, the U.S. economy may have modestly recovered from the 2025–2026 shocks. GDP growth could hover around 2%, unemployment in the 4–5% range, and inflation back near the Fed’s 2% target—especially if major trade tensions have eased. Trump would likely campaign for the GOP nominee claiming victory on multiple fronts: having “tamed” China, revived domestic industry, and restored prosperity.
Expect symbolic actions to reinforce that narrative:
Photo-ops at newly built factories
A possible “Phase Two” trade agreement with China, addressing intellectual property or agricultural purchases, potentially leading to the removal of remaining tariffs on consumer goods
Finalized trade agreements with Europe and other allies that mark the formal end of Trump’s trade war—perhaps involving expanded U.S. export quotas (e.g., LNG or soybeans) in exchange for the removal of tariffs on metals and machinery
These actions could boost consumer sentiment, calm markets, and trigger a late-term feel-good factor, often seen in election years as presidents attempt to engineer a strong economic finish.
Risk Scenario: Slump, Unrest, Geopolitical Shocks
On the other hand, 2028 could reflect a worst-case scenario where Trump doubled down rather than compromised. In this case, the U.S. might face a prolonged economic slump.
Key concerns include:
Cumulative fallout from trade isolation and global retaliation
High debt levels reducing fiscal flexibility
Permanently lost market share for American exporters, especially in agriculture
A fragile manufacturing base unable to offset losses elsewhere
The next administration would inherit an environment of fractured alliances and weakened global competitiveness, possibly requiring a full-scale diplomatic and economic reset.
Domestically, unrest could add to the turbulence:
Hardline immigration enforcement could result in labor shortages and protests, especially in agriculture and construction sectors
Civil rights rollbacks, including actions against DEI programs, could stoke widespread social polarization
Political instability in an election year may hurt consumer confidence and tourism, further slowing growth
Other risks loom as well. Foreign policy flashpoints—such as tensions with Iran or Taiwan—could escalate into crises with economic spillovers, for example, through energy price shocks or market volatility.
Economic Strategy: Pump-Priming the Finish
Given Trump’s focus on metrics like the stock market as indicators of success, it is likely he would attempt economic pump-priming in 2028, regardless of prior-year turbulence. Possible measures include:
Pressuring the Federal Reserve for further stimulus, or enabling more aggressive monetary easing through appointed loyalists
Talking down the U.S. dollar to promote exports
Pushing infrastructure spending—possibly in partnership with a bipartisan Congress
A large infrastructure bill could inject fiscal stimulus into key regions, create jobs, and give both parties a political win to campaign on. This approach mirrors strategies used by past presidents, such as Eisenhower’s launch of the interstate highway system.
If deficits are no longer politically sensitive, Trump could frame such spending as a capstone achievement, helping close his presidency with a sense of momentum and accomplishment.
2025–2028 Trajectory
The Trump second term, viewed across the full four years, is likely to follow a broad arc:
2025: Confrontation and disruption—tariff escalation, market turmoil, and the start of economic realignment
2026: Stimulus and political tension—tax cuts, Fed easing, and midterm electoral consequences
2027: Adjustment phase—either early signs of a manufacturing recovery or deepening stagflation
2028: Legacy year—Trump seeking to lock in achievements, rebrand trade deals, and stabilize the economy before exit
By the end of 2028, the U.S. economic landscape will likely be fundamentally altered. Higher tariffs and protectionism may become institutionalized. Global supply chains will have evolved to reduce reliance on the U.S., and the federal debt load will be significantly heavier.
Whether this is remembered as a successful reshaping of American industry or as a period of stagnation and diminished global influence will depend on the outcomes that matter most to voters and investors—jobs, wages, inflation, and markets. These indicators will ultimately determine not just Trump’s legacy, but the investment climate entering the next decade.
Investment Strategy Rankings 2025 & Alpha Plays
If a U.S. citizen has extra cash to invest in this volatile environment, they could consider a range of strategies.
Below I’ll rank several investment approaches based on potential upside and feasibility from highest-risk/highest-reward to more conservative plays.
I also highlight the most compelling opportunities to generate alpha (market-beating returns) in 2025… when policy-driven volatility is expected to remain high.
Note: NOTHING HERE IS FINANCIAL OR INVESTMENT ADVICE. CONSULT A FINANCIAL PROFESSIONAL IF YOU NEED ASSISTANCE.
Alternative read: Trump’s Economy 2025: An Investment Strategy
Strategy #1: “Trade War Alpha” – Short the Market & Profit from Volatility
An aggressive investor could seek to capitalize on continued market declines and sharp swings by shorting equities or trading volatility instruments. Trump’s shifting trade and economic policies have already triggered major corrections—and more turbulence is likely as trade disputes, tariff escalations, and political uncertainty persist.
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