December 3, 2024 What Manufacturers Can Expect from Trump’s Presidency

How President-elect Trump’s proposed approach to taxes, foreign trade, regulations, and tariffs will impact manufacturing and distribution.

By: Kevin Rhode, Partner at The Bonadio Group

It’s official: Donald Trump is heading back to the White House, and Republicans have taken control of the Senate and the House of Representatives. Given these changes, manufacturers are understandably anxious about how the president-elect’s proposed policies will impact their business come 2025.

While it’s important to be aware of what policies he is proposing for his presidential term, it’s even more imperative to understand the specific, tangible implications of each ruling.

Below outlines each policy to be expected and details how it may impact businesses that have a manufacturing and distribution function.

Tariffs

Tariffs are expected to be reinstituted and expanded under the Trump presidency, especially around imports from China. His goal is to strengthen U.S. manufacturing; however, this policy may include imposing across-the-board baseline tariffs on foreign-made goods and a 60% tariff on goods specifically from China – a longtime supplier for many U.S. companies.

To navigate these changes, it is likely that manufacturers who source overseas will need to identify new suppliers in non-tariffed markets or based in the U.S. They may also consider near-shoring to locations that will allow them to remain compliant with these new policies, like Mexico.

Manufacturers aren’t the only ones that might have to plan for changes, however. Unfortunately, since tariffs would drive up production costs, it is likely that a majority of impacted manufacturers will pass these costs on to consumers in order to protect their bottom line. Eventually, this may drive up retail costs and affect price competitiveness overall.

Domestic Incentives

In line with his “America First” approach, Trump’s administration wants to promote domestic manufacturing with enhanced tax credits for new manufacturing plant builds and research and development. He also may look to provide extra support for industries that support national security – like pharmaceuticals.

Capitalizing on these tax credits to invest in infrastructure could ensure that manufacturers remain competitive. Additionally, as U.S. skilled laborers will increase in demand, retention and recruitment will become an imperative focus for manufacturing leaders.

While boosting U.S.-based production may stimulate certain industries, it also may add to inflationary pressure. It’s important to keep an eye on those impacts as companies seek more homegrown opportunities and suppliers.

Tax Policy Reform

Trump has promised to make the Tax Cuts and Jobs Act (TCJA) provisions permanent, and it is likely that, with the House controlled by Republicans, this legislation will pass. Additionally, corporate tax rates are expected to be decreased by 15% for those with U.S.-based operations and manufacturing functions. Tax savings are also expected in the form of interest deductibility, with many manufacturers favoring the pre-2022 provisions, as well as full expensing provisions, which will encourage more capital investments.

For manufacturers, this could mean an increased cash flow for potential reinvestment opportunities, and an increase in technology investment to boost productivity. Also, there may be a shift in what legal form of business companies decide to use as corporate tax rates dip lower than other forms of business structure.

While these changes sound positive for manufacturers, there is a risk they may lead to public spending cuts and contribute to federal deficits.

Regulatory Changes

Trump’s administration feels that manufacturers face too many compliance burdens, so it is likely that Environmental, Social, and Governance (ESG) requirements and corporate transparency policies will experience a rollback. This could mean reducing emission standards and allowing for more self-regulations when it comes to streamlining safety protocols and reporting to organizations like Occupational Safety and Health Administration (OSHA).

The president-elect also favors the integration of digital assets, so cryptocurrencies may become a more widely accepted transaction tool across the industry.

While deregulation will significantly lower manufacturers’ compliance costs, they must keep in mind the impacts to their public perception. Consumers still widely value sustainability and upholding social standards, so putting the environment and worker safety at greater risk simply to reduce costs will likely have unfavorable reputational impacts.

Trade Agreements

Trump has expressed an interest in forging new trade deals when he re-enters The White House. This includes revisions to the U.S.-Mexico-Canada agreement to restrict the rules of origin in favor of U.S. manufacturing. Additionally, to undermine China’s influence on American trade, he may seek new agreements with countries like Vietnam, India and South Korea.

These initiatives are likely to lead to short term disruptions for businesses should they not proactively realign their supply chain sourcing and distribution channels. American products may also see enhanced competitive advantage as they enjoy more favorable trade conditions.

Now that we know what to expect from the next presidential term, manufacturers must start planning now for anticipated changes to the way they conduct business in order to remain competitive and profitable over the next four years and beyond.

Kevin Rhode is a partner in the firm’s Assurance Practice. Kevin works closely with large-to-middle-market clients in various industries, including food and beverage, manufacturing, fuel and energy, service providers, and financial institutions. In addition, Kevin works with portfolio companies of private equity groups and entities with multi-national operations. His responsibilities include coordinating and managing financial statement audits and other attest services, including financial statement reviews, compilations, and agreed-upon procedures engagements. He has been a licensed CPA since 2011 and is a member of the American Institute of Certified Public Accountants. To learn more about The Bonadio Group, visit www.bonadio.com.

Read more from the author:
How Donald Trump’s Presidency May Impact the M&D Industry

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