With his resounding victory, President-Elect Trump has the potential to impact a wide range of policy provisions, from the economy to a raft of regulatory rules and directives
The results of the 2024 US Presidential election were likely to be far reaching, no matter which candidate came out on top. With President-Elect Donald J. Trump’s return to power secured, some additional clarity is now available on what may be ahead for the economy and regulatory rulemaking.
Financial regulatory impact
Trump has been an outspoken supporter of digital assets and cryptocurrencies. At a Bitcoin conference earlier this year, he promised to build a government stockpile of Bitcoin and to fire U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler on the first day of his administration.
Although it may be up for debate whether Trump can actually fire Gensler, he can demote him from the chair position and designate a new chair. The likely replacement would be Republican Commissioner Hester Peirce or her Republican colleague, Mark Uyeda. Although Gensler could stay on for the remainder of his term as Commissioner through 2026, it is customary in such situations for chairs to step down with such a change in power in the presidency.
Crypto is a big winner
Bitcoin prices spiked to an all-time high on election night above $75,000 as the outcome of the election unfolded, and the US stock market exploded the morning after the election, clearly indicating some investors were very bullish on the Trump win.
And perhaps the most notable race beyond the Trump victory that is relevant to financial services regulation, occurred in the Ohio U.S. Senate race in which Sen. Sherod Brown (D-Ohio), Chair of the powerful Senate Banking Committee, lost his race. Brown has been an outspoken critic of crypto-assets and a close ally of Gensler. The crypto industry targeted Brown, raising an estimated $40 million through various political action committees and contributions for his victorious opponent, Bernie Moreno, a businessman from Ohio.
However, Sen. Senator Elizabeth Warren (D-Mass.), a staunch crypto critic, easily won a third term, defeating pro-crypto candidate John Deaton. With the Democrats losing control of the Senate and Brown’s defeat, however, Warren stands to be the next ranking member of the Senate Banking Committee.
Sustainable investing & deregulation
Trump’s presidency is set to have profound implications for sustainable investing. A cornerstone of his campaign promises includes rolling back green regulations that currently hinder oil and gas drilling and coal mining. If enacted, these deregulatory measures could significantly boost shares in traditional energy sectors, reversing the gains made under the Biden-Harris administration’s climate policies.
Trump also has expressed a firm intention to rescind all unspent funds under the Inflation Reduction Act, a landmark climate law from the Biden-Harris administration. This act encompasses hundreds of billions of dollars in subsidies for electric vehicles, solar power, and wind energy. The rollback of such funds could stymie growth in renewable energy sectors, although comprehensive changes would likely necessitate congressional approval. It’s worth noting that several Republican lawmakers have shown support for parts of the Inflation Reduction Act, indicating potential resistance within Trump’s own party.
Broader economic implications
A Trump presidency is expected to foster a more protectionist trade environment. His previous tenure was marked by trade wars, particularly with China, which saw tariffs imposed on a range of goods. Renewed trade hostilities could disrupt global commerce, create supply chain bottlenecks, and increase costs for consumers and businesses alike. The ripple effects would be felt globally, with economies closely tied to US trade policy bearing the brunt.
The regulatory landscape under Trump is also expected to see significant shifts. Deregulation would be a key theme, affecting sectors from energy to finance. While this might spur short-term economic growth by reducing compliance costs for businesses, it could also lead to longer-term risks such as environmental degradation and financial instability. The rollback of regulations designed to mitigate climate change could have severe environmental consequences, while less stringent financial oversight might increase the likelihood of market excesses and crises.
You can hear the recent Thomson Reuters Institute Insights podcast about the impact the Trump presidency will have on tax policy and the tax industry itself on Spotify here.
On the fiscal front, Trump’s proposed tax policies could lead to substantial changes in the US economy. Tax cuts, particularly for corporations and high-income earners, might stimulate investment and economic activity; however, these measures could also exacerbate income inequality and increase the federal deficit, leading to potential long-term economic challenges.
Individual industry sectors could also see various impacts. The energy sector, for example, stands to gain significantly from Trump’s proposed policies. Rolling back regulations on oil, gas, and coal industries would likely lead to increased production and profitability. However, this could come at the cost of environmental sustainability and could slow the transition to renewable energy sources.
In the technology sector, the outcome could be mixed. On one hand, deregulation might benefit tech companies by reducing operational constraints; but on the other, increased tariffs and trade tensions with key markets like China could disrupt supply chains and affect profitability.
Further, Trump’s stance on healthcare could lead to attempts to dismantle or alter the Affordable Care Act. This could result in significant changes in healthcare coverage and costs, impacting both consumers and providers. The pharmaceutical sector might benefit from deregulation, but broader healthcare access issues could arise.
Conclusion
Even though no one can predict the future for certain, the election of Donald Trump is set to bring profound changes to the economic and regulatory landscape of the United States. Emerging markets, sustainable investing, and various sectors will all feel the impact of his policies. While some industries might benefit from deregulation and tax cuts, the broader implications could include increased market volatility, environmental risks, and challenges to global trade dynamics.
As we look ahead, it is crucial to consider these potential outcomes and prepare for the complexities and opportunities they present. The economic and regulatory shifts under a Trump administration will undoubtedly shape the global landscape in significant ways, demanding careful analysis and strategic response from businesses, investors, and policymakers alike.
Additional reporting for this post was supplied by dispatches from Todd Ehret of Regulatory Intelligence
