Days from now, President-elect Donald Trump will begin his second term in the White House backed by a largely loyal, Republican-held Congress, big business pivoting to align with MAGA priorities, donors on pace to give $500 million to support his agenda, and a vastly empowered MAGA-friendly media and information ecosystem. Despite a historically small Republican margin in the U.S. House of Representatives, quite a few House and Senate Democrats appear open to working with him on the issues that won him the presidency, such as border security, public safety, the economy, and the efforts to cut wasteful government spending. A diverse group of Democrats, from centrist and swing-state lawmakers to those farther off to the left, voted last week to pass an immigration enforcement bill, reflecting pragmatic considerations on the ground amid the Democratic Party’s efforts to recapture voters’ trust and refocus its messaging ahead of next year’s midterm elections.
Trump’s early priorities include releasing as many as 100 executive orders on his first day in office, encompassing immigration, border security, trade, energy, and rollbacks of some of President Joe Biden’s landmark policies related to greenhouse gas emissions and electric vehicles. That will be followed by a sprint to fill key administration posts, fund the government for the rest of FY2025, raise the federal debt limit, and put together one or two massive packages of border, energy, and tax provisions, expected to be passed with Republican-only votes in the coming months. On a foreign policy front, Trump now promises to end the war in Ukraine within six months of taking office (rather than within 24 hours) while claiming credit for a nascent Gaza ceasefire deal negotiated on Biden’s watch. The details of Trump’s proposed tariff offensive against China, Mexico, Canada, and other trading partners are still being worked out (more on that below) and will likely remain in flux as governments around the world maneuver to limit potential damage to their economies or political standing.
Trump supporters have long argued that the president-elect should be taken seriously but not literally. Polling shows Trump in a stronger political position now than at the start of his first term, although few of his priorities seem to match those of U.S. voters, who want him to focus on economic issues (at 47%) over deporting immigrants (21%) or imposing tariffs on foreign goods (2%). Clearly, many Americans are willing to give Trump the benefit of the doubt — but time will tell if more of them come to embrace some of the most divisive elements of his agenda, such as investigating his political opponents or pardoning participants of the January 6, 2021 attack on the U.S. Capitol.
During his presidential campaign, Donald Trump floated minimum tariffs of 10% to 20% on all imported goods, and 60% or higher on shipments from China. Whether he still stands by those targets, and just how aggressively he is planning to pursue them, remains less clear. Latest reports point to a tension between a desire to “go big” with duties on a broad range of countries and categories of goods, and a surgical approach envisioning gradual tariff increases or covering only those sectors deemed critical to U.S. national or economic security.
To maximize disruption, Trump could tap the International Economic Emergency Powers Act (IEEPA), which authorizes a president to manage imports during a national emergency, to unleash blanket tariffs on allies and adversaries alike without having to justify them on national security grounds. In 2019, he used the IEEPA to threaten tariffs on Mexican imports to get Mexico to reduce the number of undocumented migrants crossing the border with the U.S. He could reprise this tactic, threatening Mexico and Canada with 25% tariffs and China with an additional 10% tariff, perhaps ramped up in 2% to 5% monthly increments, until they act to reduce migration and drug trafficking.
In a more targeted approach, Trump could expand the use of Section 301 or Section 232 tariffs on critical imports, which could include goods in the defense industrial supply chain, critical medical supplies, and clean energy imports like batteries, rare earth minerals, and solar panels. (A Trump transition team document previously recommended imposing tariffs on all battery materials globally in a bid to boost U.S. production, and then negotiating individual exemptions with allies.) If implemented, such an approach could limit business uncertainty and allow for corporate exemptions but still raise consumer prices and cause trade partners to retaliate, as China did against the tariffs imposed both by Trump and President Biden since 2018. We are watching Canada and Mexico, the U.S.’s closest trading partners, calibrate their approach in response to Trump’s negotiating tactics, one day threatening to reciprocate his tariffs and the next offering to buy more American and fewer Chinese goods or stepping up efforts to curb U.S.-bound flows or drugs and migrants.
Biden administration officials are betting that some of President Biden’s latest actions on clean technology could survive the Trump presidency. Among those are the new, technology-neutral 45Y and 48E clean electricity tax credits introduced as part of the Inflation Reduction Act (IRA) and projected to do more than any other IRA provision to reduce America’s carbon emissions. The new tax credits follow a basic formula that has long applied to wind and solar projects and extend it to a wider range of clean energy sources, including geothermal, nuclear, advanced batteries, and certain kinds of biofuels. Some, like nuclear and geothermal, have the support of Chris Wright, President-elect Trump’s nominee to lead the Department of Energy, and congressional Republicans who advocate ending the incentives for technologies like wind and solar. The way the law is written, no single technology can be excluded from the tax credits, making them relatively safe from Republican attempts to cut federal spending on clean energy transition.
Another recent Biden move allocates $635 million in grants to build out EV charging and other clean transportation infrastructure across 27 U.S. states and the District of Columbia. The funding is part of the $7.5 billion made available for this purpose under the 2021 bipartisan infrastructure law. Despite a slow rollout, much of the funding has been formally committed to specific projects, likely putting it out of reach of the incoming Trump administration (especially considering special budgetary guardrails written into the law). That being said, Trump could redirect some of the remaining funds to other alternative refueling technologies, such as hydrogen and propane, which are also covered under the program.
Since last month’s election, President Joe Biden has kept a relatively low profile while President-elect Donald Trump has increasingly acted as if he were already in office, meeting with foreign leaders, dictating trade and immigration policy, and moving quickly to put his stamp on government institutions through controversial nominees to top posts in his incoming administration.
Trump’s favorability stands at 41%, down 10 percentage points from his 2016 presidential transition, but more Americans expect positive change now than eight years ago. Wall Street holds a largely positive view of Trump’s agenda, and more voters, 39%, express “a lot” of confidence in his ability to manage the economy than they did in any U.S. president in the last fifty years, including Barack Obama (37%), George W. Bush (29%), and Ronald Reagan (26%) during their transitions.
As he takes the reins of a largely healthy economy he inherited from Biden, Trump is poised to take credit for positive economic impacts of Biden-era infrastructure and manufacturing projects as they go from blueprints to reality over the next four years — provided they move forward unimpeded.
Behind the scenes, Biden officials and leading Democrats in Congress are putting finishing touches on some of this administration’s biggest priorities. Department of Energy officials are working to finalize billions of dollars in loans to clean energy projects, many of them in Republican congressional districts, that could be delayed or cancelled by the Trump administration that already promised to redirect any unspent funds under the Inflation Reduction Act. New restrictions on oil and gas drilling in the U.S.’s largest wildlife refuge and a newly released report on the environmental impacts of increasing LNG exports are expected to slow down future efforts to expand domestic fossil fuel production. As of this writing, the Senate has confirmed 233 Biden-nominated federal judges that could shape the judiciary for decades, reaching parity with Trump’s record level of judicial appointments at this point in his first term.
In recent days, Biden has been more vocal about what he wants his legacy to be, pointing out weak spots in Trump’s economic record and criticizing his plans for tariffs as disproportionally impacting working and middle-class Americans. Trump himself has admitted that tariffs might not actually lower consumer prices. Time will tell how long Trump’s honeymoon phase will last once he begins to govern and voters tune in to some of his more controversial policies and administration picks. As for Biden, history may judge his record more kindly than the 37% approval rating suggested by the current polling average.
President-elect Trump plans to impose sweeping tariffs on all imports from China, including some categories of goods coming via third countries, like made-in-Mexico Chinese-brand cars. His nominees for key administration posts, such as Sen. Marco Rubio for Secretary of State and Rep. Mike Waltz for national security adviser, have a strong track record as China critics and supporters of a more robust defense posture to counter Beijing’s perceived national security threat. His pick for ambassador to China, David Perdue, has criticized Trump’s previous wave of tariffs as overly broad but now views Beijing as an enemy set to “destroy capitalism and democracy.”
Others, such as Scott Bessent, Treasury Secretary nominee who has described proposed tariffs as a “maximalist negotiating position,” and Howard Lutnick, whose role as Commerce Secretary would put him in charge of enacting Trump’s tariff and trade agenda, hold more nuanced views, indicating an effort on Trump’s part to balance the hardliners with more pro-business voices — regardless of conflicts of interest that could result from Lutnick’s extensive business ties to China.
The presence of both Rubio and Bessent on Trump’s team recalls divisions between China aides and advisers in his first administration, some of whom wanted to contain and confront China while others pushed to maintain and expand commercial ties. This time around, there are differences between Rubio and Waltz, vocal supporters of Taiwan, and Trump, who has suggested that the island should pay the U.S. for its defense. There are also differences around the future of TikTok (set to be banned in the U.S. from Jan. 19, 2025), which Trump promised to “save” against the wishes of his appointees like Jacob Helberg, the State Department’s incoming top economic policy and trade official.
Trump’s recent suggestion that Beijing and Washington could “together solve all the problems in the world” points to a tension between the president-elect’s aggressive approach on trade that is being shaped by Lutnick and Jamieson Greer, his nominee for the U.S. Trade Representative, and his openness to using tariffs as a bargaining chip toward non-trade objectives, such as curbing the inflow of Chinese fentanyl. This tension between Trump the America First trade warrior and Trump the dealmaker is one that is likely to define U.S.-China relations in the next four years because, if his first term is any indication, the president-elect will be Washington’s ultimate decision maker on China.
By all accounts, President Biden’s subsidies for consumer electric vehicle purchases and EV charging stations appear poised for termination once President-elect Trump is sworn into office. The Trump transition team is putting together plans to cut spending in those areas and redirect any unspent funds to national defense priorities, including securing China-free supplies of batteries and critical minerals and boosting domestic minerals processing and battery production. (The plans also include rolling back emissions and fuel economy standards to 2019 levels and blocking California’s right to set its own emissions rules, which the Biden administration renewed just days ago.) An acknowledgment of the value of battery production for national security could help assuage concerns among mostly Republican lawmakers who would otherwise risk their constituents’ ire over lost investments and missed opportunities for economic development. An official announcement putting these plans in motion could come as early as day one of the second Trump term, although congressional action to repeal the tax credits will likely take months.
With a slim majority in both houses of Congress, the Republicans will begin the next term balancing several priorities, such as funding the federal government for the rest of the year, extending Trump’s signature 2017 tax cuts (which would otherwise expire at the end of 2025), and enacting the president-elect’s expansive border security and energy agenda. It may take Republican leaders several months to craft a bill that would pay for the extended tax cuts by eliminating EV subsidies and cutting costs in a myriad other ways, and pass it with Republican-only votes using the budget reconciliation process, which requires a simple majority in both houses. By the time the bill passes Congress and is signed into law, likely in late 2025, Trump’s Treasury Department could also push to amend existing regulations to make it harder to claim the EV tax credits, tightening the rules on the sourcing of materials from China or adding new, onerous procedures for consumers claiming the credits. We will be watching auto manufacturers and other affected entities lobby Congress and the incoming administration on EV tax breaks and related incentives as the debate over the tax legislation plays out in the new year.
