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Many business leaders should start thinking about how the new Trump administration will impact their business. This article is not about who you should have voted for, but what topics should be on the business leader’s radar screen.

Candidates of both parties make many promises they do not keep. Sometimes they forget their promises, sometimes they cannot get Congress to go along, and sometimes they take action that does not get the desired results. So take all the campaign talk with skepticism. President Trump, in particular, tosses out ideas before any detailed analysis or implementation plan has been developed. His campaign statements should not be taken literally, though we can glean a fair amount from his continued themes.

Tariffs

Businesses that buy foreign-made products or sell goods to foreign buyers should watch for tariff changes. Many tariffs can be changed by the president without Congressional approval.

The United States lowered tariffs regularly after World War II—until Donald Trump’s first term in office. His tariffs were targeted—most imports were not affected. But steel and aluminum from China were hit hard, along with a number of other products. Other countries retaliated with tariffs on U.S. sales to those foreigners. After President Trump left office, the Biden administration kept most of the Trump tariffs in place.

Manufacturing companies use global supply chains. For example, country of assembly for an automobile doesn’t tell you anything about where the transmission or airbags were made. The country shipping the most cars into the U.S. is … Mexico. But many cars are assembled in Mexico with parts from the U.S. and other countries. So it’s complicated

Although Trump has talked about massive tariffs, he won’t set huge tariffs and then turn his attention elsewhere. He’s a negotiator, a deal-maker. He believes that is his strength. So expect his strategy to be targeted, but larger than eight years ago. Then he’ll negotiate a deal and cut back somewhat. But by the end of his term, tariffs will be higher. The effect is that buyers of manufactured goods and agricultural products will pay more, and the increased cost will have to be passed on to customers. Increased tariffs will not kill the economy, but they will certainly be a negative factor.

Immigration & labor

Businesses that employ low-skilled workers should monitor changes in immigration policy.

Before the Trump presidency, net immigration was averaging about one million people. Under Trump, immigration declined. Then the Biden administration liberalized rules for refugees seeking asylum. Net immigration went up sharply in the Biden administration. In round numbers, net foreign immigration went from one million a year to three million a year.

The national employment gains of recent years were enabled by this immigration. Some immigrants got work permits, others worked without permits. The economic impact was noticeable. Employers found workers, and the new workers spent money.

With fewer immigrants, businesses will find it harder to hire people for low-skilled jobs. This will limit economic growth but not reduce activity. Companies thinking about using advanced technology in lieu of low-skilled workers should accelerate those plans.

Environmental and Climate Regulations

The administration has a wide range of discretion in environmental and climate regulations. President Trump was not really a deregulator in his first administration, but he very much slowed the growth of new regulations. The second Trump administration will probably slow down climate-related regulations and enable more energy production and transportation.

The range of possible changes is quite wide. Few new regulatory initiatives will be started, but retracting existing rules usually requires lengthy processes. Companies should not expect dramatic roll-backs. Instead, they will find that their worst fears for future changes do not come to pass.

Taxes

President Trump will certainly keep the business tax cuts that he implemented in 2017 in place—it would take Congressional action to end them. The personal income tax changes that Trump got passed need to be renewed next year, and that seems highly likely.

In some of his campaign speeches Trump spoke of changes that seem highly unlikely to be implemented, such as exempting tips and Social Security from taxation. Reviving the unlimited state and local tax (SALT) deductions was mentioned, but in the past some Republicans liked the limit as a way to punish liberal high-tax states. He may push to make permanent the expensing of business purchases of equipment, which would provide some stimulus to capital spending.

It is far too early for companies to make plans for tax law changes, but keeping an eye on the news makes sense.

Overall Impact

The new president’s policies will probably slow economic growth by a small amount. Long run average growth of GDP runs about two percent (inflation adjusted). The impact of immigration restrictions would lower our capacity for growth by one or two tenths of a percent. Tariffs would boost prices, but through a one-time effect rather than causing persistent inflation. Relaxing environmental and climate regulations would boost economic activity by a small amount. The net effect of the policies will hardly be noticeable by most businesses, swamped by the routine changes in the competitive environment. However, specific businesses will find challenges—and opportunities—in the coming changes.

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