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Post-election impact to manufacturing & consumer business
Potential changes from the Trump Administration
In a world where we’ve become comfortable with thinking that everything can be analyzed and predicted, the latest presidential election is a reminder that we can all still be surprised.
Business leaders are now forced to confront a geopolitical landscape outside of the expected, and to challenge previously held assumptions about how to effectively operate manufacturing and consumer businesses. This change in administration could widen the horizon lines for potential policy changes that may impact business.
These three focal points from President Trump’s campaign platform could potentially be significant for businesses:
1. Global trade policy: Only time will tell how President Trump will transform his campaign platform into a governing agenda. If the circulating first-200-day document is any indicator, trade policy—particularly changes to North American Free Trade Agreement (NAFTA)—may significantly impact manufacturers and the cost of goods to consumer businesses.
Actions such as leaving NAFTA if Mexico doesn’t agree to renegotiate the pact, establishing a 45 percent tariff on all Chinese imports, and declaring Beijing a currency manipulator could be significant departures from current global trade policy.
2. Regulatory changes: President Trump campaigned on a promise of changing regulatory priorities in a variety of forums. From changes in health care and energy production to financial services oversight reform. What regulatory changes may have the greatest impact on manufacturing and consumer companies?
Businesses in the carbon value chain stand to gain from a potential loosening of oil and coal production regulation. Companies providing goods and services to these sectors could benefit from a renewed push toward energy independence. However, the trends in underlying commodity prices should be monitored closely if the market begins to appear oversupplied in any of these areas.
Labor and employment are other key focus areas. Some of the most well-publicized immigration policy shifts limiting immigrants from certain countries or religious groups from entering the country could adversely impact hospitality and retail businesses. Additionally, some proposed changes to overtime rules may likely affect the exempt status of employees and require overtime for those earning less than $47,476 per year. A variety of state and local efforts to raise minimum wage may have local impacts on business models and profitability in the short run.
3. Repatriation of cash: President Trump has proposed a one-time tax holiday at ten percent on repatriated cash as part of tax reform proposals. In the current law, repatriated foreign-source income is taxed at the full corporate rate with allowance for foreign tax credits.
If the last tax repatriation period in 2004 is any indication, a significant portion of the cash may be used for stock buybacks and dividend increases. However, organizations may also be expected to use the cash to invest in growth, including potential deals or research and development.
Planning for the future
In economic policy, there are no free lunches. Even though changes to legislation will take some time to pass and then implement, executive-level policies contain drawbacks and opportunities and carry the risk of unintended consequences. Those companies who are able to identify changing norms and shifting trends could be better positioned to take advantage of opportunities and thrive in uncertainty.
Companies should carefully consider the range of possible outcomes and plan for several different futures. While a presidential election may only have a binary outcome—red or blue—the resulting changes to the business environment are always going to have more facets and may require planning and lead time to set investments and strategies in motion to capture future opportunities.
Business leaders can’t single-handedly make the world more stable. But they are in a position to anticipate, adapt, maneuver, and adjust course as needed to help their organizations become more resilient.
Download the full report to learn more about how regulatory changes under President Trump could affect manufacturing and consumer businesses.