Navigating Trump 2.0

Based on his promises, his history, and his advisors, Trump’s administration can be expected to revamp its protectionist approach by offering new and enhanced tax breaks and subsidies to boost domestic production.

‍Details:‍

‍Enhanced Tax Credits: Trump’s proposed policies aim to reverse the trend of financial pressures overshadowing R&D priorities, offering expanded R&D tax credits and allowing businesses to fully expense the cost of heavy machinery and equipment within the first year. There has also been talk of direct subsidies for companies building new manufacturing plants.

‍Sector-Specific Focus: Industries considered integral to national security like pharmaceuticals, rare earth metals, and semiconductor production may receive targeted support.

‍Implications:

‍Enhanced tax credits would alleviate much of the financial burden of innovation, enabling manufacturers to invest in cutting-edge technologies and infrastructure without compromising their bottom lines. For small and medium-sized manufacturers, this is particularly impactful.

Additionally, these incentives could lead to reduced operating costs and increased competitiveness for U.S. manufacturers and distributors, which could trigger a massive surge in domestic production. This would also boost other industries like construction and logistics, and create increased demand for skilled manufacturing labor which is likely to drive wages up.

Under the new administration, tax policy will be used to drive growth in the manufacturing and distribution sectors. During his campaign, Trump promised to make provisions of the Tax Cuts & Jobs Act (TCJA) permanent.

Details:

‍Full Expensing Provisions: These provisions will allow businesses to immediately deduct the full cost of certain investments in new or improved technology, or infrastructure, which could trigger a surge in domestic infrastructure investment.

‍Interest Deductions: It’s expected that the regulations around interest deductions that were in place up until 2022 will be reinstated. Specifically, Trump promised voters shortly before the election that he’ll treat interest paid on loans for domestically produced vehicles like the deduction for interest on home mortgages on federal tax returns. This would help to discourage Chinese automakers from attempting to sell vehicles in the United States.

‍Lowered Corporate Tax Rates: In his first term, Trump lowered the corporate tax rate from 35% to 21% via the Tax Cuts and Jobs Act of 2017 (TJCA). Now in his second term, Trump seeks to lower it even further, and has proposed a rate of 15% for domestic manufacturers.

‍Territorial Tax Adjustments: There will likely be changes implemented to ensure multinational corporations are taxed in a more favorable manner; this would discourage them from shifting profits from parent companies or subsidiaries in high-tax jurisdictions to subsidiaries in low-tax jurisdictions.

‍Implications:

‍If corporate tax rates become significantly lower than for other structures, this could trigger a shift on what legal form of business structure new and existing companies decide to use.

Tax reductions will also incentivize companies to reshore operations and strengthen domestic supply chains. Tariffs on imports, paired with these tax incentives, may compel businesses to reevaluate global footprints and consider U.S.-based production.

Additionally, tax savings will allow companies to channel cash into automation, facility improvements, or other productivity-boosting technologies.For manufacturers, these reforms present a pivotal moment. American companies positioned stand to benefit immensely, while others may find it increasingly necessary to localize operations to capitalize on these tax breaks. To prepare for these changes, businesses should assess their tax strategies now.

In an effort to reduce compliance burdens for manufacturers and distributors, The Trump administration plans to roll back regulations, with an emphasis in the areas of energy, manufacturing and real estate, especially related to Corporate Transparency Efforts and ESG.

‍Details:

‍Environmental Regulations: Changes in this category will likely include loosening emissions standards and simplifying permit processes for factory expansions, which would be a major cost-saver for manufacturers. Additionally, Trump promised during his campaign to roll back other 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.

‍Labor Rules: The Trump administration’s anticipated direction on labor policy represents a stark departure from the previous administration’s stance on independent contractors. Once the incoming administration takes office in January, they will quickly drop the previous USDOL’s defenses to the employer groups and roll back the rule through rulemaking to the Trump independent contractor rule - a rule that makes it much easier to classify workers as independent contractors.

‍Implications:

‍A reduction in regulations for manufacturers and distributors could lead to significant cost reductions, and more cash on hand for reinvestment.

With regards to the labor regulation rollbacks, previously risk-averse legal and HR departments will recalibrate and have an opportunity to push forward huge value to their companies by utilizing 1099 workers. This is especially true in manufacturing where we can expect the Trump administration to incentivize onshoring which in turn will bring a huge increase in production and in demand for skilled labor. Additionally, adjustments to rules under OSHA and similar agencies could aim to lower compliance costs and reduce reporting requirements.

Significant shifts in U.S. international trade policy are expected, driven primarily by Trump’s concerns about trade deficits with key trading partners, his stated goal of moving overseas manufacturing back to the United States, and his willingness to use trade actions as a coercive tool.

Details:

‍Revisions to USMCA: The United States-Mexico-Canada Agreement (USMCA), requires a joint review by July 2026 and agreement by all three parties to continue. However, with the recent inauguration of Donald Trump, this review will likely become more of a full-fledged renegotiation as the new administration seeks to reshape North American trade, migration, and security, as well as address China’s growing influence in regional supply chains.

‍Bilateral Trade Negotiations: In order to counterbalance Chinese influence, Trump is likely to pursue agreements with other countries in Asia such as India, South Korea, and Vietnam.

Implications:

In the short term, these potential trade renegotiations could create disruptions and force businesses to adjust distribution & sourcing channels. In the long term however, more favorable conditions for American companies will lead to greater market share. Either way, manufacturers and distributors will need to be able to adapt quickly to these changes, especially if new tariffs or trade agreements impact costs.