Last Updated on Thursday, 19 December, 2024 at 8:53 am by Andre Camilleri
As 2024 draws to a close, the United States and the world brace for the return of President-elect Donald Trump to the White House. Set to assume office on January 20, 2025, Trump’s second presidency raises pressing questions about his economic agenda. Recent statements by Trump´s treasury secretary nominee, Scott Bessent, suggest intriguing parallels of “Trumponomics 2.0” with the ambitious reforms undertaken by former Japanese Prime Minister Shinzo Abe, the so-called “Abenomics”.
Abenomics, introduced in 2013, aimed to revitalize Japan’s economy through a “three-arrow” strategy: aggressive monetary easing, fiscal stimulus, and structural reforms. By fostering growth in high-potential sectors like energy and manufacturing, Japan sought to reduce reliance on foreign markets and revitalize its stagnant labour market. While Abenomics successfully halted Japan’s deflationary spiral, boosted confidence in international trade, and improved corporate profitability and employment, it failed to fully address deep-rooted structural issues. Critics argue that its benefits were not broadly shared, and its reliance on monetary easing created new vulnerabilities. The question now arises whether similar policies and their challenges could underpin Trump’s recovery plan.
Trump’s first presidency was characterized by an “America First” economic agenda. Tax cuts, deregulation, and a staunch emphasis on renegotiating trade deals dominated the landscape. The 2017 Tax Cuts and Jobs Act was the flagship achievement, aimed at spurring domestic investment and reducing corporate tax burdens. At the same time, Trump’s trade wars with China and other partners, coupled with tariffs, marked a dramatic shift toward economic nationalism.
While these policies garnered short-term gains, such as record-low unemployment rates by 2019, critics argue they failed to address deeper structural challenges like wage stagnation, labour force participation, and innovation deficits in key sectors. Trumponomics 2.0 could be an opportunity to chart a more forward-looking path, building on lessons from Japan’s Abenomics.
Bessent’s recent statement hinted at a potential focus on fostering growth in sectors such as energy, manufacturing, and advanced technologies. This aligns closely with the goals of Abenomics, which targeted innovation as a driver of economic expansion. Abe’s reforms emphasized deregulating industries, encouraging private-sector investment, and enhancing workforce participation, particularly among women.
One area of overlap could be a targeted push for domestic energy independence and green innovation. While Trump has historically championed fossil fuels, his new administration may need to address growing global demand for clean energy technologies to remain competitive.
So far, questions remain about how Trumponomics 2.0 will take shape — both on paper and in action. One central issue is whether structural reforms will take centre stage. Abenomics aimed to dismantle rigid labour market structures, boost workforce diversity, and incentivize entrepreneurship. The question is whether Trump could pivot from traditional deregulation to structural reforms that foster innovation and inclusivity. Addressing skill gaps and improving education may prove essential in a rapidly evolving global economy.
Another critical question, particularly of interest to Europe, is how Trump will balance economic growth with global relations. Abe’s reforms sought to reduce Japan’s reliance on foreign markets by strengthening domestic demand. Trump’s “America First” doctrine similarly favours economic self-reliance, but his previous trade policies often alienated allies and disrupted global supply chains. Early signals suggest that Trumponomics 2.0 may adopt a more protectionist stance rather than seeking a cooperative approach.
Finally, there is the issue of what role fiscal stimulus will play. Japan’s experience highlights the importance of aligning fiscal measures with long-term structural goals. If Trump aims to stimulate growth through infrastructure spending or tax reforms, the design of these policies will be critical to their success. The key question is whether they will prioritize short-term political wins or address systemic challenges such as climate resilience and digital transformation.
While Trump’s potential adoption of Abenomics-style innovation policies presents opportunities for the U.S. economy, significant challenges loom. Implementing structural reforms requires political will and bipartisan support — two elements that proved elusive during Trump’s first term. Moreover, Trump’s general unpredictability and tendency to prioritize short-term economic gains over long-term planning could undermine efforts to emulate the sustained focus of Abenomics. For example, Abe’s government actively pursued corporate governance reforms to boost productivity and encourage investment. Whether Trump’s administration will embrace similar measures or revert to broad tax cuts remains an open question.
Japan, as a key U.S. ally and the architect of Abenomics, is carefully monitoring Trump’s return to power. While preparing for potential shifts in economic policy to avoid a resurgence of contentious trade disputes fuelled by Trump’s protectionist tendencies, Japan has also signalled a willingness to engage with the Trump administration to strengthen economic ties and to collaborate in innovation-driven sectors. Similarly, the European Union must brace for a more assertive U.S. stance. Policymakers in Brussels may need to bolster multilateral alliances, reform trade defence mechanisms, and push for greater EU self-reliance in critical sectors.
As 2025 begins, one thing is certain: the next chapter of Trumponomics will shape not only the U.S. economy but also the global economic order for years to come.
Dr Lina Klesper is International Legal Assistant at PKF Malta
