Economic Report: What Will Trump II Mean for Business?

By Kurt Bauer, Wisconsin Manufacturers & Commerce

I think it is fair to say that the second Trump term will look a lot like the first, but perhaps a bit more populist. I make that prediction based on the people Trump has surrounded himself with, both informally, like Elon Musk and Joe Rogan, and formally, like cabinet and subcabinet selections, including Robert Kennedy, Jr. for Secretary of the Department of Health and Human Services and Tulsi Gabbard for Director of National Intelligence. I would label all of those people as more center left on the political spectrum than center right.

But the big question for business leaders is what will Trump II mean for the economy. Here are the bellwether issues to watch.

Taxes: Tariffs and border security are getting most of the pre-inaugural media attention, but keep in mind that many of the Trump-Ryan tax reforms, enacted in 2017, will expire in 2025.

President Biden and Vice President Harris had both proposed raising the federal corporate rate to 28 percent, while Trump has said he wants to lower it to 20 percent. More importantly, he told the New York Economic Club before the election he would support lowering the rate for manufacturers to 15 percent. Doing so would be an added incentive to move critical production back to not just North America (near shoring), but to the U.S. (reshoring).

Energy: If elected, Harris would have pursued an anti-carbon agenda that would have eventually and intentionally spiked energy costs, similar to what has occurred in Germany.

By contrast, Trump fully embraces the bounty of North America’s vast energy resources, which is an incalculable economic advantage for the U.S. economy, particularly for the manufacturing and agriculture sectors. But if he is forward thinking, Trump should also encourage the expansion of nuclear energy, which the U.S. has underutilized for decades.

Mining: As mentioned above, North America is rich in resources, including the metals and minerals necessary to produce advanced electronics. The problem is that the radical environmentalists, as well as onerous permitting requirements, have blocked attempts to extract those resources. But with China placing a ban on the export of rare earth minerals, the U.S. needs to fast track the exploration, permitting, extraction, and processing of rare earths.

Regulations: In 2022, the National Association of Manufacturers (NAM) calculated that it costs U.S. businesses an incredible $3.079 trillion (yes, trillion) to comply with federal regulations. That amount is equal to 12% of U.S. GDP, and larger than the manufacturing sector’s total economic output. It is also higher than all but 6 of the world’s largest economies.

In his first term, Trump mandated that three regulations be struck from the federal registry before a new one could be added. For his second term, Trump has empowered Musk and Vivek Ramaswamy to create the unofficial Department of Government Efficiency (DOGE). The plan is to have DOGE issue a report on cutting $2 trillion from the federal budget by 2026.

There are few things Trump can do to ignite economic activity more than by reducing the cost of government regulation.

Inflation: Inflation supplanted the labor shortage as the top issue facing Wisconsin businesses in the last WMC Employer Economic Survey (Summer 2024). The DOGE initiative can help ease inflation to some extent. So can reducing the budget deficit, which is expected to be around $1.8 trillion in 2024. As mentioned, Trump has a track record of cutting regulation. But he wasn’t a deficit or debt hawk in his first term. And if Trump’s tariff strategy backfires, it could spark higher inflation.

Tariffs: In his first term, Trump was arguably the most pro-manufacturing president in the last 80 years because he lowered taxes, achieved energy independence, and used tariffs as a negotiating tool when other nations created an unlevel playing field for U.S.-made products and goods. But threatening to impose tariffs is risky. It’s great if it forces other countries to change their behavior, but retaliatory tariffs could threaten access to components U.S. manufacturers need and can’t source domestically.

Border Security: Exit polls showed that this was THE winning issue for Trump and if he has a mandate, it is on securing the border and, to some extent, following through on his pledge to deport “the worst of the worst” illegal immigrants. The question is how will Trump decide who gets deported and how will it be implemented? Another question is will he simultaneously reform the legal immigration system, particularly how work visas are issued. Wisconsin businesses across the economy desperately need workers and legal immigration has to be part of the solution.

Bauer is president and CEO of Wisconsin Manufacturers & Commerce | WMC is the combined State Chamber of Commerce, Manufacturers’ Association and Safety Council. WMC represents 3,800 businesses of all sizes and from every sector of the economy.