5 ways Trump could reshape the economy

Businesses are bracing for President-elect Trump and the ways he is aiming to reshape the U.S. economy during his second term.

Stocks have rallied since Tuesday as traders expect a Trump administration to cut corporate taxes and loosen regulations – two goals typical of Republican presidents.

“Clients have very high expectations any time a new administration comes in. But given all the promises they made on the campaign, the expectations are big," a Democratic lobbyist told The Hill.

"Given the optics of a potentially unified government, patience to deliver lower taxes and a more business-friendly regulatory environment will be short."

But Trump's plans for steep new tariffs and mass deportations loom as two of the most serious and unpredictable obstacles facing businesses

Here are five major Trump plans that businesses are preparing for and watching.

Tax reform

Republicans are on track to win control of both the House and Senate, and are aiming to move a major tax cut package within the first 100 days of Trump's new term.

The GOP will be able to use reconciliation, which allows bills like tax measures to pass with a 51-vote majority in the Senate, averting the filibuster and the need for bipartisan support.

Key parts of Trump’s 2017 tax law, his signature legislative achievement from his first term, is set to expire in 2025. Republicans hope to make cuts to income tax rates permanent and move forward with Trump’s promise to reduce the corporate income tax rate to 15 percent.

“Assuming a Republican sweep, we know that we won't be seeing a billionaires tax or a wealth tax on high net worth individuals," Mary Burke Baker, who leads the tax practice at K&L Gates, told reporters Friday.

Baker also warned that Republicans could scrap certain personal or business tax credits to fund cuts to income tax rates as they did in 2017.

“If you take nothing else away from what I'm saying today, just remember that you should not assume that your favorite deduction or your tax credit is safe," Baker said.

Tariffs

If tax breaks are the carrot, tariffs are the stick.

Trump is betting big on tariffs to push for investment in American jobs and domestic industry. The tariffs, which range from 10 to 20 percent on all imports into the U.S., have sparked alarm among companies with global presence and international supply chains.

Some economists have warned the plan could reignite inflation, slow down the economy and exacerbate national deficits. A recent study commissioned by the National Retail Federation (NRF), whose members could face much higher costs from import taxes, found Trump’s tariff proposal could cost consumers as much as $78 billion per year.

Trump has dismissed his critics, calling "tariff" the “world’s most beautiful word in the dictionary” and claiming his plan would bring “thousands of companies” to the U.S.

“It must be hard for you to spend 25 years talking about tariffs as negative and then have somebody explain to you that you are totally wrong,” Trump shot back at Bloomberg Editor-in-Chief John Micklethwait, who challenged his tariff proposal last month during an appearance at the Economic Club of Chicago.

Other lobbyists outlined the concerns clients have with Trump’s vow to expand tariffs and what that could mean for corporate structures.

“They’re worried about tariffs because for the last 30 years, most big corporations have built their infrastructure based on the global marketplace and there is definitely, I think even more broadly than the last time, the notion that we are going to build a wall of tariffs that is going to reshore U.S. manufacturing and isolate China economically,” said a GOP lobbyist with insight into Trump world.

“Corporate America is wrestling with that and trying to figure out what that means.”

Immigration crackdown

The president-elect focused his campaign on his vow to crack down on immigration and to launch the largest deportation operation in American history on Day 1 of his administration.

His goal to target those in the country illegally, and particularly those with criminal records, is expected to be a massive logistical lift and impact companies that rely on immigrants.

Trump’s incoming “border czar” Tom Homan said Monday the Trump administration plans to crank up workplace raids as part of its broader immigration crackdown, aimed at addressing labor and sex trafficking.

The Democratic lobbyist described clients’ feelings on Trump’s immigration plan as twofold — some thinking it’s “necessary” to “ease some of the headwinds they thought Biden brought” and some “worried that unrest” would occur and “affect the work environments.”

The American Immigration Council predicted in October that Trump’s mass deportations would lead to a loss of 4.2 percent to 6.8 percent of annual U.S. gross domestic product (GDP).

Undocumented immigrants make up 4.6 percent of the U.S. labor force and three-quarters of the undocumented immigrant population participated in the workforce in 2022, according to the non-partisan organization.

The group also predicted that California, Texas, and Florida would be hit hardest. Sectors that would be most impacted include construction, which has 1.5 undocumented workers, as well as hospitality and manufacturing.

Deregulation

Trump’s business-friendly policies are expected to bring in more activity in the mergers and acquisitions space after the Biden administration's crackdown on corporate consolidation.

Biden’s Federal Trade Commission (FTC) sued to block mergers between supermarket chains Kroger and Albertsons and between JetBlue Airways and Spirit Airlines, among others.

FTC Chair Lina Khan has led the Biden administration’s antitrust agenda and before the election, critics wanted her replaced if Vice President Harris had won on Tuesday. Now, those voices are eager for Trump to bring in her replacement.

“A lot of our clients feel burdened by the Biden regulatory agenda, and Trump's first term saw very meaningful regulatory reform,” Will Moschella, who co-chairs the government relations department at Brownstein Hyatt Farber Schreck, told The Hill.

“They were successful during the first term to reduce regulatory burdens, and I think that's going to be a major focus of theirs,” Moschella added.

The FTC under Khan took action against 38 mergers since June 2021 and companies have abandoned 14 mergers during FTC investigations, according to a letter Khan sent to GOP lawmakers last year.

“There’s been a lot of frustration over the last four years” on mergers and acquisitions, according to the GOP lobbyist with insight into the Trump world. But, the source added, while the business community wants regulatory chances, “regulatory uncertainty is always anxiety-provoking for corporations.”

Retribution

The threat of retribution may make the business community wary to speak out on issues of concern, especially social issues.

During his first term, Trump frequently called out businesses and executives for taking actions or making statements that angered the president, including GM CEO Mary Barra, Amazon founder and Washington Post publisher Jeff Bezos and Disney CEO Bob Iger.

Republicans at large have also pledged to crack down on environment, social and governance (ESG) policies at businesses, bristling at companies who've sought to weigh in on politically charged issues.

Trump's campaign trail threats to go after his “enemies," jail journalists, target Democrats and punish other adversaries, raised concerns in corporate America, too.

“Business leaders will again face pressure to speak out on social [and] cultural issues,” Bruce Mehlman of Mehlman Consulting wrote in the latest edition of his Age of Disruption newsletter.

“But the political climate [and] stakeholder engagement strategies have evolved. Balancing business imperatives with stakeholder priorities will take tact, as will opposing the Administration on certain issues while remaining at the table on others.”