Trump 2.0’s Impact on Your Wallet

One week into the new administration and we have already seen a flurry of actions that will impact your taxes, the economy and your investments. As we start the new year, here is a primer on Trump 2.0 thus far:

Let’s start with the flurry of executive orders Trump issued during his first week in office. For most investors and organizations, there is no direct impact on your finances for now. Immigration reform was first up in the line of executive orders. Trump announced stronger boarder enforcement, including using the military to enforce U.S. border laws at the southern border with Mexico. It’s unlikely that Trump will deport enough people to make a significant impact on the labor market. However, his actions will signal a more challenging environment for potential immigrants and likely discourage many from attempting to come into the country illegally. Remember, more legal immigration is positive for the economy – and for humanity - we just need a system that fosters less illegal immigration.

Trump signed two orders on energy, one declaring an “energy emergency” and another encouraging more domestic energy exploration and drilling. In general, the Trump administration will be more friendly to energy production, which is a good thing. However, energy markets are global, so don’t expect a drop in gas prices just because we produce more oil in the U.S. Other countries will simply sell less to balance the market.

No tariff actions have been taken up to this point, which sparked a market rally last week. Trump has threatened significant tariffs on Mexico and Canada by February. My view is that he will likely implement some tariff, but not the 25% being discussed in negotiations. Instead of significant tariffs, we are likely to see a renegotiation of the USMCA trade agreement with Mexico and Canada. The most likely gains for the U.S. in negotiations are higher minimum wages in Mexico and requirements around goods imported from China into Mexico or Canada for distribution into the U.S. China has used those countries to get around U.S. trade policy for the last few years.

Taxes are probably the most significant issue for you and will likely will have the most direct impact on your bottom line. The expectation is that most of the 2017 Trump tax cuts are extended. If they are not extended, that effectively will act like a tax hike on both you and companies, so I expect most of the prior changes will remain the same. Given the fiscal situation, it would surprise me if Trump lowers taxes again. Perhaps he gets something for some specific groups like tipped workers, but I think getting the extension done will be hard enough on its own.

In the video version of the podcast, there are a couple of key things to watch for as we go through the battle this year on taxes. Watch the video or listen to the podcast for more details – and a few practical steps you should consider taking now.