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Donald Trump wins big and fast

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IT IS AN extraordinary comeback—or, as Donald Trump triumphantly put it in West Palm Beach, Florida, in the early hours of November 6th, “a political victory that our country has never seen before”. After losing four years ago he has survived impeachment, conviction as a felon, numerous other indictments and two assassination attempts, and will become America’s 47th president, to add to his stint as the 45th. He becomes the oldest man ever to win the White House.

Many had expected a long wait for the result of an extremely close election to become clear. In the event, the outcome was evident within hours. Mr Trump looked set to win all seven of the critical swing states: he triumphed in North Carolina, Georgia, Pennsylvania and Wisconsin, and had strong leads in Michigan, Arizona and Nevada. That translates into a decisive advantage in the electoral college.

It appears that Mr Trump was able to draw support from both urban and rural voters at levels notably higher than in his contest against Joe Biden in 2020. In state after state, Mr Trump performed better than he had in 2020. In Florida, for example, where he won by three percentage points last time, his margin is on track to surge to 12 points. And although opinion-poll aggregates had consistently shown Kamala Harris to be ahead in the national popular vote, it seems that Mr Trump may have won that too. Just as in 2016 and 2020, in other words, the polls underestimated Mr Trump’s support.

What went wrong for Ms Harris? For one thing, her advantage among women voters, on whom Democrats were pinning their hopes, turned out to be smaller than expected. The gender gap, between the votes of men and women, actually narrowed, from 23 points in 2020 to 20, according to exit polls. Among Hispanic voters, Mr Trump made striking inroads, improving his margin by ten percentage points compared with 2020, according to CNN’s exit poll. The trend was particularly strong among Hispanic men: Joe Biden won their vote by a margin of 23 points; this time Mr Trump was on track to prevail among them by a margin of ten points. More broadly, dissatisfaction with high inflation and immigration contributed to a sense among voters that the country was on the wrong track, for which they naturally blame the incumbent. Much as Ms Harris sought to present herself as the candidate of change, she was stuck with her association with the current administration.

As well as the White House, the Republicans also wrested back control of the Senate. It was always going to be hard for Democrats to hold on to their slender majority in that chamber, given that they were defending a disproportionate number of seats (a third of which are up for election in each election cycle). Not only did Republicans take the vacant seat in West Virginia, as expected; they also flipped Ohio and Montana and prevailed in a close contest in Nebraska. The upsets Democrats hoped for in Florida and Texas failed to materialise. Republican control of the Senate smooths the way for Mr Trump to make important appointments—from cabinet secretaries to generals to Supreme Court justices—that require Senate confirmation.

Whether the Republicans complete their sweep by retaining control of the House of Representatives is still not clear. Results in California, to arrive later, will determine that. But Mr Trump, in his victory speech, was confident that the House would be his, too.

“This will truly be the golden age of America,” he declared. Few will question that the country is indeed entering a new age. Whether Mr Trump will truly “heal” America, as he promised, is more debatable. Beyond America’s borders, too, the consequences are momentous. From tariffs to climate change to Ukraine, the world must brace itself for Trump II.

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Economics

How Donald Trump could win the future

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The Democrats’ appeal to Silicon Valley is eroding

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Economics

Trump and Fed Chair Powell could be set on a collision course over rates

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Jerome Powell and President Donald Trump during a nomination announcement in the Rose Garden of the White House in Washington, D.C., U.S., on Thursday, Nov. 2, 2017.

Andrew Harrer | Bloomberg | Getty Images

President-elect Donald Trump and Federal Reserve Chair Jerome Powell could be on a policy collision course in 2025 depending on how economic circumstances play out.

Should the economy run hot and inflation flare up again, Powell and his colleagues could decide to tap the brakes on their efforts to lower interest rates. That in turn could infuriate Trump, who lashed Fed officials including Powell during his first term in office for not relaxing monetary policy quickly enough.

“Without question,” said Joseph LaVorgna, former chief economist at the National Economic Council during Trump’s first term, when asked about the potential for a conflict. “When they don’t know what to do, oftentimes they don’t do anything. That may be a problem. If the president feels like rates should be lowered, does the Fed, just for public optics, dig its feet in?”

Though Powell became Fed chair in 2018, after Trump nominated him for the position, the two clashed often about the direction of interest rates.

Trump publicly and aggressively berated the chair, who in turn responded by asserting how important it is for the Fed to be independent and apart from political pressures, even if they’re coming from the president.

When Trump takes office in January, the two will be operating against a different backdrop. During the first term, there was little inflation, meaning that even Fed rate hikes kept benchmark rates well below where they are now.

Trump is planning both expansionary and protectionist fiscal policy, even more so than during his previous run, that will include an even tougher round of tariffs, lower taxes and big spending. Should the results start to show up in the data, the Powell Fed may be tempted to hold tougher on monetary policy against inflation.

LaVorgna, chief economist at SMBC Nikko Securities, who is rumored for a position in the new administration, thinks that would be mistake.

“They’re going to look at a very nontraditional approach to policy that Trump is bringing forward but put it through a very traditional economic lens,” he said. “The Fed’s going to have a really difficult choice based on their traditional approach of what to do.”

Market sees fewer rate cuts

Futures traders have been waffling in recent days on their expectations for what the Fed will do next.

The market is pricing in about a coin-flip chance of another interest rate cut in December, after it being a near-certainty a week ago, according to the CME Group’s FedWatch. Pricing further out indicates the equivalent of three quarter-percentage-point reductions through the end of 2025, which also has come down significantly from prior expectations.

Investors’ nerves have gotten jangled in recent days about the Fed’s intentions. Fed Governor Michelle Bowman on Wednesday noted that progress on inflation has “stalled,” an indication that she might continue to push for a slower pace of rate cuts.

“All roads lead to tensions between the White House and the Fed,” said Joseph Brusuelas, chief economist at RSM. “It won’t just be the White House. It will be Treasury, it’ll be Commerce and the Fed all intersecting.”

Indeed, Trump is building a team of loyalists to implement his economic agenda, but much of the success depends on accommodative or at least accurate monetary policy that doesn’t push too hard to either boost or restrict growth. For the Fed, that is represented in the quest to find the “neutral” rate of interest, but for the new administration, it could mean something different.

The struggle over where rates should be will create “political and policy tensions between the Federal Reserve and the White House that would clearly prefer lower rates,” Brusuelas said.

“If one is going to impose tariffs, or mass deportations, you’re talking about restricting aggregate supply while simultaneously implementing deficit finance tax cuts, which is encouraging an increase in aggregate demand. You’ve got a basic inconsistency in your policy matrix,” he added. “There’s an inevitable crossroads that results in tensions between Trump and Powell.”

Avoiding conflict

To be sure, there are some factors that could mitigate the tensions.

One is that Powell’s term as Fed chair expires in early 2026, so Trump may simply choose to ride it out until he can put someone in the chair more to his liking. There’s also little chance that the Fed would actually move to raise rates outside of some highly unexpected event that would push inflation much higher.

Also, Trump’s policies will take a while to make their way through the system, so any impacts on inflation and macroeconomic growth likely won’t be readily apparent in the data, thus not necessitating a Fed response. There’s also the chance that the impacts might not be that much either way.

“I expect higher inflation and slower growth. I think the tariffs and the deportations are negative supply shocks. They hurt growth and they lift inflation,” said Mark Zandi, chief economist at Moody’s Analytics. “The Fed will still cut interest rates next year, just perhaps not as quickly as would have otherwise been the case.”

Battles with Trump, then, could be more of a headache for the next Fed chair, assuming Trump doesn’t reappoint Powell.

“So I don’t think it’s going to be an issue in 2025,” Zandi said. “It could be an issue in 2026, because at that point, the rate cutting’s over and the Fed may be in a position where it certainly needs to start raising interest rates. Then that’s when it becomes an issue.”

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Economics

Congestion pricing in New York gets the go-ahead after all. Maybe

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NOVEMBER 20th marks the first “Gridlock Alert” day of New York City’s holiday season. This is the official designation for the city’s busiest traffic days of the year. But traffic is bad most days, with more than 900,000 cars entering Manhattan’s central business district. INRIX, a traffic-data firm, found that New York City leads the world in urban traffic congestion among the cities scored, with the average driver stationary for 101 hours a year. After years of false starts, including a cowardly pre-election pause by Kathy Hochul, New York’s Democratic governor, congestion pricing has the green light.

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