In his victory speech, Donald Trump promised Americans a new “golden age”. While he had the numbers to win the election, the economic realities he faces will make delivering on his promise challenging.  

Trump’s victory reflects many Americans’ frustrations with living standards and inflation during the Biden-Harris administration. Vice President Kamala Harris struggled to connect on these issues.  Her campaign focused more on Trump’s legal troubles than on a clear economic plan of her own, leaving many voters unconvinced.  

Yet Trump’s own economic programme also contains worrying contradictions. In his first term, he ran substantial deficits through tax cuts and increased government spending. This was hardly the free-market approach he had promised. Instead, it was old-fashioned deficit spending.  

Now he is pledging to do more of the same, but on an even grander scale. 

Trump has proposed steep tariffs on imports. These would reach 60 percent on Chinese goods. Other trading partners face tariffs of 10-20 percent. These measures would slow international commerce. The resulting higher consumer prices could cancel out any positive effects from his planned tax cuts. 

America’s public debt already stands at eye-watering levels. It exceeds 120 percent of GDP.  

For now, the United States enjoys what economists call an “exorbitant privilege”: It can borrow extensively in its own currency because the US dollar is the world’s reserve currency. 

But even this privilege has limits. This is especially true if trading partners seek alternatives to the US dollar in response to aggressive tariffs. 

There are lessons for Trump from Liz Truss’ brief and ill-fated period as British Prime Minister. Her attempt to cut taxes while increasing spending caused a fierce market backlash, ending her tenure within weeks.   

America’s reserve currency status provides far more protection than Britain ever enjoyed. Yet even this shield has its limits. Trump’s proposed fiscal irresponsibility dwarfs Truss’s experiment. 

Trump’s trade plans would have major global impacts. His tariffs could reduce GDP in the European Union by 0.6% and cut China’s growth by over two percentage points. 

New Zealand is heavily reliant on trade, and Trump’s deglobalisation policies threaten our export markets. Their impact on global growth will weaken international demand for our exports 

Strengthening our fiscal position and diversifying our trading relationships beyond traditional partners are urgent priorities in this new economic landscape. 

Regardless of political promises, economic realities are inescapable. Trump’s “golden age” will more likely turn out to be a dark age if his strategy is based on deficit spending and trade wars.