Economists, like much of the world today, need to recalibrate.

Donald Trump's overwhelming victory in Tuesday's US presidential election answers some questions and raises others. Here's a question: How good will Trump be for the world's largest economy in the short term — and how scary in the long run, and not just for the United States? His promises of monetary and fiscal expansion, coupled with trade and labor market headwinds that Trump will almost certainly inflict on himself, suggest a real economic rollercoaster ride with numerous winners and losers.

Economists, like much of the world today, need to recalibrate.

Donald Trump's overwhelming victory in Tuesday's US presidential election answers some questions and raises others. Here's a question: How good will Trump be for the world's largest economy in the short term — and how scary in the long run, and not just for the United States? His promises of monetary and fiscal expansion, coupled with trade and labor market headwinds that Trump will almost certainly inflict on himself, suggest a real economic rollercoaster ride with numerous winners and losers.

Oxford Economics just released its assessment of a “limited Trump scenario” in which a Republican White House and Congress extend tax cuts and increase federal spending, particularly on defense, which will temporarily offset the damage from higher tariffs and mass deportations. The result is slightly stronger GDP growth after Trump's first full year in office, followed by a sharp correction through 2028 as inflation rises, the labor market tightens and trade shrinks.

The short-term impact was anticipated – markets rejoiced on Wednesday – and was easy to model. It is more difficult to estimate what impact Trump's promised tariffs of up to 20 percent on all trading partners and at least 60 percent on China will have on US trade, growth and inflation. Oxford Economics expects the tariffs to be phased in gradually; If Trump acts as promised, the negative macroeconomic impact would come sooner and more severely.

Ultimately, as Adam Posen, the president of the Peterson Institute for International Economics, said: doesn't stop pointing it outthe actual risks of Trump 2.0 to the economy are the known unknowns. You can restrict goods (by raising tariffs) or restrict the supply of labor (by deporting all immigrants who work in agriculture and services). Doing both at the same time would be an unprecedented, risky and certainly expensive experiment.