Prediction markets are closely tracking the economic impacts of President Trump’s proposed policies, including higher tariffs, tax cuts, and tighter immigration controls. These measures are expected to push inflation more than previously forecast, creating opportunities for traders to speculate on the ripple effects across sectors.
Inflationary pressures are expected to persist into 2025, according to a previous report from Augustine Faucher, Chief Economist at PNC Financial Services Group, who forecasts continued increases in consumer prices.
Bettors are active on Kalshi, with 22% wagering on inflation rising between 2.6% and 3% year-over-year by December 2025, amid a trading volume exceeding $1.7 million.
Strong inheritance meets policy ambiguity
Trump inherits one of the strongest economies for an incoming administration in decades. Unemployment stands at 4.1%, its lowest transition figure since 2001, while private-sector job growth and the employment-to-population ratio (EPOP) remain robust. December’s inflation rate of 2.7%, however, signals potential challenges ahead as the Federal Reserve eyes its 2% target.
President Trump declared a national energy emergency on his first day, aiming to boost oil and gas production. As part of his renewed “drill, baby, drill” agenda, this initiative includes resuming export permits for liquefied natural gas projects and lifting restrictions on drilling in areas like the Arctic National Wildlife Refuge.
Kalshi’s prediction market watches closely with this week’s gas price. Initially, the market for gas prices to exceed $3.125 per gallon on January 20th stood at 92%. As of now, the probability has dropped to 31%, with over $799,000 in trading volume. The market closes on January 27th. Although Trump signals actions to lower gas prices, the betting market is split on the near-term effects of his energy policies.
Kalshi traders are actively speculating on whether Trump will impose large tariffs in his first year, with “yes” currently priced at 59%. The market, which defines “large tariffs” as raising the U.S. average weighted tariff to at least 6% by Q4 2025, has attracted over $221,000 in trading volume.
“We will impose tariffs on any country that devalues their currency to take unfair advantage of the United States,” President Trump stated in his inauguration speech.
Additionally, Trump has threatened to impose a 25% tariff on imports from Canada and Mexico, set to begin on Feb. 1, 2025. He claims this move will generate significant revenue for the U.S.
Scott Bessent, the nominee for Treasury secretary, named three reasons that Trump will deploy tariffs in a Senate confirmation hearing last week. Aside from improving trade practices and increasing revenues, he said Trump might also use tariffs for negotiations.
Immigration might slow growth, not activity
Immigration reform is a key focus of the Trump administration, with early executive orders targeting tighter border security and reduced migration levels.
Prediction markets are already reflecting heightened speculation. For instance, Kalshi’s market on whether the Senate will pass a border security bill by the end of 2025 currently stands at 44%, with over $71,000 in trading volume.
Economists suggest while the economic impact of mass deportations is negligible, reduced immigration may temper GDP growth.
National bitcoin reserve?
Speculations are surging on Kalshi regarding whether President Trump will create a national bitcoin reserve this year. Currently, the market stands at 55%, with over $477,000 in trading volume.
For some context, Trump recently launched his own cryptocurrency, dubbed “$TRUMP,” which quickly surged in market value after its release. The drop of “$Melania,” named after the first lady, and “$Lorenzo,” for Reverend Lorenzo Sewell, released shortly after his speech at the inauguration, has sent the internet into a spiral.
