2025: The Good, the Bad, and the Ugly Year Ahead

That was fast! 2024 seemed to buzz right past us. And if you blinked, you may have missed quite a few history-making events, not to mention a historic Presidential re-election of Donald J. Trump as the 47th US President.

Only one other president in American history skipped a term. President Grover Cleveland won first in 1884 and again after defeating President Ben Harrison in 1892. What’s more, Cleveland’s wife, First Lady Frances Cleveland, historically told White House staff not to hastily remove anything; they’d be back.

Grover Cleveland was a rebel and known for his honesty, integrity, and commitment to fiscal and political reforms much needed at the time. Cleveland wanted a massive reset in government eliminating operating inefficiencies, waste, corruption and patronage staffing mismanagement.

Sound familiar? 

Given the vast scope of Trump’s ambitious plans and promises to improve our nation in 2025, it’s needless to say the best way to think about a Trump 2nd term is — “unpredictable but promising. “

Trump is a wildcard. He is a businessman – a transactional deal-making character with little political skill or patience for political party agendas, and maybe that’s exactly what America needs right now: another Clint Eastwood on horseback riding into town.

And in Trump-town, the law of the land is Economic Nationalism, with little tolerance for ideological distractions that may spoil the ride.

That doesn’t mean there’s no plan. On the contrary, the Trump team is expected to hit the ground running day-one January 20th with a flurry of new Executive Orders.

So, I thought now is a good time to summarize Trump’s 2nd term economic proposals that might have the biggest impact on CEO and business leadership plans in 2025.

I call it — The Good, The Bad and The Ugly … same as the beloved Clint Eastwood western classic film, but this time it’s Trump playing the crusty wide brimmed, cocksure ‘Blondie.’

Have a look.

The Good: Lower lending costs, Tax cuts & Deregulation 

Lower lending costs 

As of the latest news the US Federal Reserve will end 2024 having lowered its Federal Funds Rate yet another .25% points to 4.25% citing a good labor market and inflation rates that are considerably lower since Covid. That means the cost of capital and risk lending to most middle-market companies with good credit may drop, or at least hold steady in 2025. This bodes well to further goose economic expansion, M&A and IPO activity. So get ready to join the party.  Next up…

Tax cuts 

In 2017 at the beginning of Trump’s first term, Congress passed the Tax Cuts and Jobs Act which lowered corporate tax rates from 35% to 21% until it expires on December 31, 2025.

Trump has already vowed to extend those cuts and to eliminate tax on Social Security checks, hospitality tips, and over-time pay among others. And further he proposes to reduce corporate tax rates down to 15% as an incentive if companies agree to re-shore manufacturing and production activities back to the US.

And while this is very favorable for job seekers, waiters and retirees, it could catch most consumers off-guard if “Made in America” products cost more, and tariffs increase the price of imports as economists expect. More on that later.

Deregulation 

Wasting no time, on December 5th 2024 the National Association of Manufacturers (NAM) took the initiative and assembled more than a 100 signatures representing a bevy of industry leaders in fossil fuels, food, chemicals, industrials, transportation, textiles, technology and more. Even the RV industry motored in.

All want the same thing, faster permitting and less costly time-wasting regulatory compliance burdens and restrictive oversight. And Trump is listening.

In fact he’s already established a new unofficial government agency called DOGE (Dept of Government Efficiency) headed by Elon Musk and entrepreneur Vivek Ramaswamy, you may have heard of them.

“Together, these two wonderful Americans will pave the way for my Administration to dismantle government bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure federal agencies,” Trump said in a statement he posted online. That’s almost incredible!

Assuming any one of these top three Good measures make headway to reduce the cost of business, bureaucracy and delays the US economy and your business and millions more will likely benefit. This means for most of us it’s time to saddle up and think big in 2025.

Unless you’re in the line of fire.

The Bad: Tariffs and Deporting illegal workers 

Tariffs 

In 1789 the very 1st US Congress passed the Tariff Act of 1789. It was designed to promote trade and collect money to run the government. Then as now a third reason according to first treasury secretary Alexander Hamilton was to protect America’s struggling manufacturing sector from offshore import competition, and grow our then fledgling industrial base from within. Of course, for every dream there’s an arm-pinching reality check.

Tariffs have consequences. 

A year later American consumers began to feel the pinch from higher prices. The imported goods they wanted cost more, which triggered the earliest known government-triggered price inflation. That could happen again.

Trump’s current Tariff proposal includes a 60% – 100% tariff on all goods from China, and 10%-20% from all other countries. Given the billions spent on Chinese products by American consumers year after year, this could spell big trouble if you source exclusively from Asia. I would advise finding alternative suppliers or be ready for a major price increase starting as early as January.

Trump argues these nations’ exports are given unfair advantages at lower costs that makes their products cheaper, and threatens US jobs. The guilty parties not only include China, but also imports from neighbors Canada and Mexico, which both export lower cost autos, electronics and petroleum products to the US.

As a result, if you are currently importing from these nations talk with your suppliers. Pencil out a plan for how to split the cost of any new tariff, because it’s the importer who pays the tax and many suppliers don’t want to lose your business. Just know your limits. Next one is a biggie…

Deporting illegal immigrants 

Trump ran for office on this issue. He believes that America is suffering because too many immigrants have crossed the Mexican border illegally. These folks from all over the world have stolen jobs and driven up municipal crime, healthcare costs and housing shortages he says.

To stem the problem Trump plans to immediately upon entering office Jan 20th  2025 implement a major national deportation round-up and expulsion of undocumented criminal immigrants. Some estimates are in the millions, but this remains to be seen. Still, the fear of deportation alone can send shock waves across the immigrant landscape as many jobs in manual labor sectors use lower cost foreign labor to build and service American industries.

A sudden absence of millions of illegal workers will likely place a tough labor burden on those businesses, and right or wrong they will have to increase prices to pay for the higher cost of labor replacements and shortages, if they can even find new replacement workers.

This is probably the scariest of Trumps proposals for small and medium sized businesses across the country, but especially in the west like California whose $60 billion agriculture industry in 2024 relies heavily on migrants, legal or not. Lastly –

The Ugly: growing geo-conflicts  

“There is nothing good in war except it’s ending,” said President Lincoln.

We all know war is ugly. We also know war is costly. Costly in lives, homes, cities, and sacrifice. The wars in Ukraine and the Middle East add little more than destruction to our one-people one-planet condition. And that has to change.

For America the cost of war is explicit, $53 billion to Ukraine another $18 billion to Isreal. Both fighting existential battles. But Americans grow weary of wars which means the gravy train could get derailed.

Americans want those billions spent at home. And by electing Trump, they’ve given him a “no more war” spending mandate, which has compelled him to promise a quick end to the hostilities and senseless loss of life and money. But it may already be too late.

According to Alexander Mertens, a professor of finance at the National University of Kyiv-Mohyla Academy in Ukraine, even if Trump does nothing, Russia is operating as a wartime economy. If Putin ends the war abruptly, the Russian economy could collapse, triggering untold global calamities. It’s already under extreme economic pressure from Western sanctions, which have been tightening the noose since 2022. And the stakes are growing. Game over if it goes badly.

Meanwhile, in the Middle East, Trump has no better hand to play.

With the most recent collapse of the Assad regime in Syria, a geopolitical vacuum has been created, which inevitably portends yet another powder keg for Israel, the region, and the globe as former ISIS leaders take control.

The good news is be it Russia or the Middle East, unlike the 1970s energy crisis, today, thanks to shale oil fracking in the Midwest we’re now the world’s #1 petro-producer — extracting more than 13 million barrels oil per day, enough to moderate energy inflation shocks in 2025.

What’s more, the real ugliness for America’s businesses and consumers is not the wars in Ukraine and the Middle East but rather the growing military escalation between the US and China over Taiwan.

Under Biden, China perceives the US as a weak, reluctant superpower that will not interfere should Beijing choose to invade and absorb the renegade democratic island province.

Trump’s victory on the other hand may have stalled that aggression. Trump knows well that any attack on Taiwan will disrupt computer chip maker Taiwan Semiconductor’s operations, and catastrophically impede US goods mfg. which will tank the US stock market. And Trump is a big fan of a rising US stock market.

So, what’s the bottom line here? 

Well. Despite all the risks, to say I’m optimistic is still an understatement. If Trump can out-gun the bad and ugly obstacles in 2025, it could be the beginning of a long-awaited multiyear animal spirits stretch of solid economic growth not seen since RFK/LBJ grew annual GDP 5% from 1961-1968.

And I’m not alone. The most recent NFIB Small Business Optimism Index topped a 3yr high, and the Business Roundtable CEO Economic Outlook Index was the strongest in more than 2 years!

Will it all hold up? Maybe. Hard to know.

But I really like Blondie’s chances in this flick.

Happy Holidays!

Written by Rick Andrade.
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