- The Inflation Reduction Act and federal EV manufacturing and consumer subsidies could be at risk in the new Trump administration.
- Trump has been very pro-tariff and plans to use tariffs to offset corporate tax cuts, which will likely impact foreign trade.
- Trump and Senate Republicans have publicly criticized the CHIPS Act. It is possible that the new administration will repeal the Act and replace it with tariffs on semiconductor companies.
Counterpoint analysts have been closely following and analyzing the developments related to the latest US presidential elections. Here are their assessments of what a Trump victory means for various sectors:
Source: Counterpoint Research
Impact on automotive sector
Both Donald Trump and JD Vance have criticized the federal government’s EV subsidies and have suggested that it should be subsidizing US-made internal combustion engine (ICE) vehicles instead. A working paper from the National Bureau of Economic Research suggests that roughly 75% of Americans who purchased EVs using federal tax credits would have purchased an EV regardless. So, some would argue that removing this tax credit would cause only a marginal decline in US EV sales.
EVs are compelling products and people will continue to purchase them. However, the growth of EV sales will likely be hit as OEMs have admitted that they have been unable to meet the needs of lower-income customers at a correct price point. While EVs are slowly falling in price, a federal subsidy for these vehicles will continue to drive growth in the segment.
As for manufacturing credits, Trump has spoken highly of EVs from a technological perspective and now has the full support and endorsement of Tesla chief Elon Musk. The Musk endorsement made many question whether it would change Trump’s approach to EV credits and manufacturing subsidies.
Tesla is the top beneficiary of IRA OEM credits. However, Tesla would arguably still maintain its market position in the US without that funding. However, that funding does greatly benefit other OEMs producing in the US and propel them closer to competing with Tesla and China.
Trump has consistently tried to present himself as a proponent of US automotive excellence. If he sees that Chinese vehicle technology poses a threat to US OEMs (which they do), he will likely keep OEM subsidies awarded through the IRA in place.
We can expect similar automotive tariffs to be maintained now that Trump is elected. This will limit OEMs’ battery sourcing options down to just a handful of companies, creating a demand-supply gap. LG Energy Solutions and Samsung SDI have already invested in building manufacturing plants in the US to meet the said demand and avoid existing tariffs and restrictions. However, this production will unlikely meet the full demand from OEMs. Other raw materials, like aluminum, could also see sharp price increases.
Impact on tariffs
Trump strongly supports tariffs and, during his campaign trail, has promised to implement more of them. The initial tariffs imposed by Trump on China in 2018 under Section 301 are still in place. He is now proposing a 10% to 20% universal tariff and levies of 60% for China.
This would likely decrease foreign trade and possibly lead to a trade war. On the other hand, it could increase tax revenue by $300 billion, with $200 billion of that coming from China. Trump has also threatened tariffs of 25% to 75% on Mexican goods unless illegal immigration via the Mexican border is stopped.
Currently, America has a free trade agreement with Mexico and Canada, called the US-Mexico-Canada Agreement (USMCA). Trump proposed and signed the deal as president in 2019 and it was ratified in 2020. His support for tariffs will likely come to fruition as the Republican-controlled Congress backs them.
Trump believes that taxes on foreign goods will relieve the US of its national debt, increase domestic manufacturing and raise money for government programs. Although the plan is promising, a study has found that the Trump-Biden tariffs have increased household costs by $200 to $300 annually. An increase in tariffs may result in increased consumer spending, as some economists and the Harris campaign have argued. However, since Trump has been attacking inflation throughout the Biden presidency, he will be wary of tariffs that cause prices to increase. Due to this, it is likely that tariffs will be applied gradually and by sector to avoid a steep rise in costs.
Still, economists predict the US GDP will decrease by 0.2% if he increases tariffs. China stated it would retaliate, and undoubtedly other countries will too. Economists believe a trade war with other countries will impact the US GDP and capital stock negatively by 0.05%. President elect Trump got a small election bump from the populist stance on tariffs. It is highly unlikely broad tariffs, however, will be passed by the numbers he needs from his own Republican party.
Impact on AI
Trump has stated that Biden’s Executive AI Order will be repealed once he is elected. The order aims to define national and cybersecurity guidelines for AI developers.
The last time Trump was in office, he also placed an Executive Order in 2019 to increase AI research investment, set AI technical standards and engage with international allies.
Trump does not seem to be swayed away from this position and doesn’t seem likely to impose barriers or restrictions on AI development. We believe that with potential relaxations in financial sectors also expected to come into fruition, there could be more M&A activity, particularly by Big Tech in AI-related fields, during the Trump administration.
Impact on semiconductor market
Trump has mentioned that Taiwan, which has the world’s largest chip industry, is taking away America’s chip business and suggested a tariff on its chips.
The Taiwan Semiconductor Manufacturing Company’s (TSMC’s) market share is 61.7% of the global semiconductor market and is expected to grow. 90% of the world’s most advanced chips come from TSMC. The company is expected to get $7 billion under the CHIPS Act, which offers incentives worth $300 billion to tech companies over 10 years specifically for semiconductor manufacturing and R&D in America.
Trump describes the CHIPS deal as bad. He claims it would be better to tariff the chip companies so high that they have no choice but to build in America without the government paying them. This suggests that Trump may repeal the CHIPS Act and place high tariffs on semiconductor companies. Speaker Mike Johnson has also supported Trump’s stand. This likelihood only increases if the Republicans gain a majority in both chambers of Congress, which is looking likely at the time of writing this. But on the other hand, Vance has publicly suggested that support for Taiwan should be a higher priority for the US (even more so than support for Ukraine), and we have no doubt that Musk would highlight to Trump the importance of NVIDIA to xAI’s progress and subsequently TSMC’s role in supporting the fledging AI industry. Therefore, we expect more wrangling over the fate of the CHIPS Act.
Impact on Big Tech
Trump has strong relationships with Big Tech CEOs like Musk and has talked about positive relationships with Jeff Bezos and Mark Zuckerberg. Other support from Silicon Valley comes from the disdain for Lina Khan, Biden’s strong anti-trust FTC chair who has been very hard on Big Tech.
With a potentially more business-friendly FTC chair during the Trump administration, and likely deregulation in the financial industry, we expect more M&A activity by Big Tech.
Trump’s support from social media companies is not as prominent due to his repeated claims that their sites are biased against conservatives.
Now that Trump is elected, Brendan Carr, a member of the FCC, would likely be named FCC chairman. Carr has proposed to deploy an agency against censorship by Big Tech in the Heritage Foundation’s Project 2025. What that would specifically entail is unclear but as the FCC chairman, Carr’s actions could include halting mergers of media companies and regulating social media.
When it comes to TikTok, a Trump presidency provides some sense of relief as Trump campaigned on TikTok-friendly rhetoric and suggested that he may repeal the sell-off legislation, already passed by the Senate. It is likely that he would reserve that action and use it as leverage in unrelated China negotiations.
As we foresee a generally more relaxed climate for Big Tech under a Trump administration, the regulatory environment will diverge from other jurisdictions, most notably the EU, whose powerful European Commissioner for Competition has been a thorn in the side of US Big Tech companies. High-profile tax and anti-trust cases have been brought against the likes of Apple, Amazon, Qualcomm, Google, Meta, Microsoft and Mastercard. In fact, in September 2019, Trump described Commissioner Margrethe Vestager as the EU’s “tax lady” who “hates the US, perhaps worse than any person I have ever met”. Regulatory differences, in addition to potential tariffs on the EU, could further inflame tensions between the US and the 27-member bloc.
Impact on corporate tax
Donald Trump has pledged to cut corporate taxes further to 15%. The corporate tax rate before Trump’s 2016 presidency was at 35%.
In 2018, Trump signed the Tax Cuts and Jobs Act of 2017, cutting the corporate tax rate from 35% to 21% until 2025. He now seeks to keep a lot of the tax measures from this Act while reducing the tax rate to 15% for companies producing in the US.
The tax rate reduction would allow corporations to keep more of their revenue for discretionary purposes. With that extra revenue, corporations can choose to buy back some of their stock, pay out dividends, or increase cash positions which act as a cushion for the company during economic downturns. There are two considerations to make with this. The first one is many Americans invest in the stock market to fund their retirement, so higher stock value and dividend payout would benefit many people. The second aspect is how much will companies choose to spend on R&D, which makes them more efficient and produce more, compared to how much they will spend on stock buybacks and dividend payouts which make the company a more attractive investment but do little for output and efficiency.
Impact on environmental policy
Trump has been publicly criticizing Biden’s climate law, calling it a “green new scam” and pledging to dismantle many aspects of it. Some of his campaign promises include boosting the production of fossil fuels such as oil, natural gas and coal. “We have more liquid gold under our feet than any other country by far,” said Trump at the Republican National Convention.
In 2015, Trump backed out of the Paris Climate Agreement and has promised to do so again, following the return of the US to the agreement back in 2021 under the Biden administration.
The Environmental Protection Agency recently finalized power plant regulations. Some of the rules want all coal-fired plants to control 90% of their carbon pollution or close in eight years, reduction in power plant emissions by 75%, and closure of all coal plants by 2039.
Trump will likely repeal these regulations and more during his term. During his previous tenure, he repealed over 100 environmental laws.
Impact on cryptocurrencies
Trump has overall been in favor of cryptocurrencies and against the regulations on digital currencies. Biden’s administration has emphasized regulatory measures and has voiced concerns about potential risks such as financial crimes and tax evasion.
Trump has called the regulations on cryptocurrencies unlawful and un-American: “We will defend the right to mine Bitcoin, and ensure every American has the right to self-custody of their digital assets and transact free from government surveillance and control.”
Because of Trump’s support to crypto, the price of Bitcoin and Trump’s victory have been closely correlated. This has led analysts to give various price targets for Bitcoin before the election. If Harris had won, the price target would have been $75,000. The price target for Trump’s win was projected at $125,000 by Geoff Kendrick.
Trump wants America to be the leading nation in crypto. In his appearance at Bitcoin’s 2024 conference, he promised to fire SEC chair Gary Gensler and create a crypto advisory council. His plan also includes using the US government’s seized Bitcoins, valued at $13 billion, to make the first Strategic National Bitcoin Stockpile. This is a change from recent years as Trump once criticized Bitcoin.
Source: Counterpoint Research
