Donald Trump’s economic incentives are best explained as a pre-election measure to boost purchasing power, but they face legal challenges and only provide marginal economic gains in the short term, according to French credit insurer Coface.

The U.S. government recently announced a set of measures aimed at supporting household purchasing power amid declining approval ratings and ahead of the November 2026 midterm elections.

Donald Trump’s economic incentives

These measures, and rumored to be more in the pipeline, are primarily targeted at the housing and consumer credit markets. 

Key actions include:

• January 7: Proposal to ban institutional purchases of single-family homes.
• January 8: Directive for Freddie Mac and Fannie Mae to purchase $200 billion in mortgage-backed securities (MBS) to ease pressure on mortgage rates.
• January 9: Announcement of a 10 percent cap on credit card interest rates (annual percentage rate or APR).

With the exception of MBS purchases, the likelihood of these policies being implemented is uncertain for Coface: it is unclear whether they have the congressional support they need. 

While some of these initiatives may provide limited short-term relief to some households, their overall impact is expected to be modest.

The APR cap could even hurt the top line of retailers focused on poorer consumers.

Here are three factors that explain the above conclusions, according to Coface:

First factor

Standard measures of purchasing power show a recovery following post-pandemic inflation. Household purchasing power experienced two exceptionally weak years in 2021 and 2022, with average inflation-adjusted wage contractions of -2.7% and -1%, respectively. 

However, since mid-2023, average wage growth has outpaced inflation, resulting in real annual wage growth of around 1-1.5%, perfectly in line with the average during Trump’s first term. 

Furthermore, research by the Cleveland Federal Reserve suggests that real wage growth has been strongest among poorer households, meaning that it is not high-income earners driving the average. 

Second factor

Nevertheless, concerns about affordability are the main political vulnerability for Republicans ahead of the November midterm elections. President Trump’s approval rating has been in free fall since he took office. 

A December survey shows that the economy is voters’ main concern (well ahead of immigration); and the main economic problem remains the cost of living (well ahead of unemployment). 

Third factor

Much of the discrepancy between robust wage growth measures and the prominence of unaffordability in consumer surveys stems from the fact that the consumer price index excludes credit and homeownership costs. If the inflation methodology had taken into account the cost of borrowing (as it did until 1983), post-pandemic inflation would have peaked at around 17%, not 9%. 

Housing, the largest expense in household budgets, has become increasingly unaffordable in recent years. Homebuyers have faced a sudden surge in prices, which have risen 53% since 2020, along with an increase in mortgage rates from 3% to 6% to 7%. 

This combination has rapidly eroded affordability, putting homeownership out of reach for many households. Rents have also risen significantly, although only slightly faster than overall inflation nationwide.