forbes.com
Trump's Policies Drive 45 bp Interest Rate Hike, Costing Households and Government Billions
Since President Trump's election in November 2024, interest rates have risen by 45 basis points, resulting in an additional $89.9 billion in interest payments for households and $163 billion for the federal government in 2025; this increase is linked to Trump's economic policies, including tariffs and increased deficits, which have increased investor uncertainty and risk premiums.
- What are the potential long-term economic consequences of the sustained higher interest rates resulting from President Trump's policies?
- The consequences of these higher interest rates are far-reaching. Increased borrowing costs for households and the government will reduce disposable income, potentially slowing economic growth. The persistent higher inflation, partially driven by Trump's tariffs, further exacerbates the economic challenges. The long-term impact could include reduced consumer spending and slower economic growth unless significant policy changes occur.
- What is the immediate impact of the 45 bp increase in interest rates since President Trump's election on households and the federal government?
- Since President Trump's election in November 2024, daily nominal interest rates have averaged 4.69%, a 45 basis point (bp) increase or more than 10% compared to the pre-election average of 4.24%. This increase translates to an additional $89.9 billion in interest payments for households and $163 billion for the federal government in 2025 alone.
- How have President Trump's economic policies, specifically his tariff policies and deficit spending, contributed to the increase in long-term interest rates?
- This surge in interest rates is primarily attributed to several factors stemming from President Trump's policies. A 27 bp increase in the real term premium reflects investors' demand for higher returns on long-term debt due to anticipated increased demand from massive deficits. Furthermore, the record-high economic policy uncertainty under Trump's administration has heightened risk premiums, driving up interest rates.
Cognitive Concepts
Framing Bias
The narrative consistently frames higher interest rates as a direct and negative consequence of President Trump's economic policies. The headline (if one were to be constructed) and introductory paragraph would likely emphasize this negative impact on households and the government. The use of phrases such as "chaotic and inflationary tariffs" and "fiscally irresponsible" sets a negative tone and predisposes the reader to view Trump's policies unfavorably. While the analysis presents some data, the overall framing strongly suggests causality and culpability.
Language Bias
The language used is often charged and loaded. Terms such as "chaotic," "inflationary," "massive deficits," "erratic," and "fiscally irresponsible" carry strong negative connotations and contribute to a biased tone. More neutral alternatives could include: Instead of "chaotic tariffs," use "tariffs implemented with significant market volatility"; instead of "fiscally irresponsible," use "policies that increased the national debt.
Bias by Omission
The analysis focuses heavily on the economic consequences of President Trump's policies, potentially overlooking other contributing factors to the rise in interest rates. While it mentions 'many moving parts', it doesn't delve into alternative explanations or provide a balanced consideration of other economic forces at play. This omission could lead readers to a skewed understanding of the causality.
False Dichotomy
The analysis presents a somewhat simplistic cause-and-effect relationship between Trump's policies and higher interest rates. While it acknowledges 'many moving parts,' it primarily emphasizes Trump's actions as the driving force, potentially neglecting the complex interplay of various economic factors influencing interest rates. This oversimplification could create a false dichotomy, making it seem like Trump's policies are the sole or primary cause.
Sustainable Development Goals
Higher interest rates disproportionately affect low- and middle-income households, increasing their debt burden and reducing their ability to invest in education and other crucial areas, thus exacerbating existing inequalities. The article highlights the significant increase in interest payments for households and the government, which will likely lead to reduced spending on essential services and further widen the gap between the rich and poor.