Beyond the big stock market rally, what does Trump’s victory mean for the economy?

What President-elect Donald Trump says he will do and what he actually does have not always been a straight line, but if he follows through on his declared intentions for the economy, it bodes well for American corporations and high-income individuals, at least in the short term. The same cannot be said for the millions of middle-income and even lower-income voters who returned him to the White House.

And down the road, things could turn bumpy for the whole economy, with a return of higher inflation, labor shortages and slower trade and tourism driven by the new broad-based tariffs and mass deportations that Trump promised to pursue on the campaign trail. His general orientation is to pull back from globalization, which would probably have a bigger effect on more internationally dependent economies such as California‘s.

A Trump presidency also will complicate the task of the Federal Reserve. If Trump’s tax cut plans and other moves stimulate the economy and drive up consumer prices, the central bank could decide it needs to end its interest rate-cutting plans earlier and leave rates higher. The Fed is expected to announce a quarter-point rate cut Thursday — its second cut in recent months.

For now, though, the expectation of good times for those at the top of the economic pyramid was immediately signaled by a leap upward in U.S. financial markets.

In the afternoon after Trump’s decisive election victory, the Dow Jones industrial average had surged more than 1,500 points, or 3.6%, as investors priced in potential gains for a swath of industries and a near-term boost to economic growth.

A second Trump presidential term is expected to bring significant policy changes favorable to big business, including lower corporate taxes and less regulation. Top regulators at agencies such as the Securities and Exchange Commission and the Federal Trade Commission are likely to be replaced, easing the path for more mergers and acquisitions.

“While Trump’s policy on tariffs and trade could bring volatility, the promise of deregulation and a more activist-friendly SEC might encourage dealmaking and shareholder activism in multiple sectors,” said Lucinda Guthrie, head of financial data company Mergermarket in New York.

Some of Wednesday’s biggest stock winners were banks and oil and gas companies. Trump’s firm that runs his social media platform took off, as did bitcoin, thanks to his remarks that he would make the U.S. the dominant cryptocurrency market in the world.

Tesla, the electric vehicle maker owned by Elon Musk, a big Trump backer, was also an early beneficiary. Its shares jumped by 14.8% even as other green energy stocks sank under the weight of Trump’s well-known bashing of climate change programs.

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Economists were expecting an early Trump-bump on Wall Street given his pro-business stance, but the Republican Party’s reclaiming of the Senate and possible retention of the House suggest he will have a clearer path to reduce the corporate tax rate even further, to 15% from the current 21%. Before the big tax cuts passed during Trump’s first term in 2017 the rate was 35%.

Any such large-scale tax cuts, however, will probably add to the nation’s budget deficits and public debts, increasingly crowding out investment and the potential for greater economic output. Interest payments on U.S. Treasury debt reached $1 trillion this year for the first time, even more than the federal defense budget.

Trump’s plan is to finance his tax scheme, which includes extending tax provisions set to expire in 2026, by imposing new tariffs. He has spoken about levying tariffs on imports by 10% to 20% across the board, and much steeper taxes on goods from China and for autos coming from Mexico.

In his first term, Trump engaged in a trade war with China and slapped tariffs on steel from many countries, often as a political weapon, straining international relations, convulsing financial markets and hurting U.S. growth. Ultimately, American consumers end up footing the bill of higher tariffs by paying more for imported goods.

“If you don’t own stocks or don’t own a home, and you’re in the bottom third or half [on incomes], you’ll feel the negative fallout much more quickly because of the higher share of your budget paying for the tariffs,” said Mark Zandi, chief economist at Moody’s Analytics.

But it’ll be even harder for many other economies around the globe as they depend more on trade than the U.S.

Stocks in Europe fell Wednesday, and not just because of the threat of higher tariffs, but also what a Trump presidency may mean for Ukraine and its war with Russia, NATO and overall European security in the region.

“No one thinks there’s an upside,” said Zandi, who was in Brussels on Wednesday for meetings with business leaders. “All in all, it’s a picture of a weaker global economy and the U.S. not being the engine of global growth that it was in the last couple of years.”

Another key element in Trump’s economic policy involves tightening the borders and undertaking mass deportations of undocumented immigrants. Millions of new arrivals in recent years, including many asylum seekers, have played a key role in meeting employers’ labor needs and helping keep the nation’s economy growing at a robust pace.

Trump’s promise to return “millions” of people will be hard to fulfill, given the cost, logistics and demands from businesses. In his first term, his administration deported an annual average of about 80,000 unauthorized immigrants residing inside the U.S.

Neither higher tariffs nor large-scale deportations are expected to happen right away — analysts expect them in the second half of next year, at the earliest, as Trump appoints his cabinet and works out concrete plans. The same goes for tax cuts, which will take time to get through Congress.

What’s more, Trump’s most aggressive economic policies are likely to be tempered by reaction from financial markets and U.S. business leaders, as they were in his first term. And for now, Trump has the benefit of having inherited a U.S. economy that has performed very well, despite the many voters who voiced unhappiness about the economy that may have been Vice President Kamala Harris’ undoing.

Through the third quarter, U.S. growth has been strong; unemployment very low, at a little more than 4%; and consumer price inflation — which soared in 2022 to about 9% — has come down to about 2.5%, lower than average wage gains.