Inauguration day has passed, and Trump is working to get his cabinet appointments through the gauntlet as quickly as possible. Regardless of who you supported this election cycle, 2025 promises to be an interesting year. Whenever we see a shift in administration, we also see market adjustments as investors react. Businesses must pivot as the country’s global and national positions shift. What does this mean for businesses today? There will be both challenges and opportunities ahead. In this article, we’ll share our financial forecast as we move into 2025.
Even with majorities in the House and Senate, the new President won’t be able to enact his proposed policies immediately. His biggest campaign promises will take some time to materialize but, when and to the extent that they do, they will greatly impact domestic and foreign business. It’s still too early to tell how far he’ll get toward accomplishing his goals, but it’s not too early to prepare for change. Building flexibility in your company’s financial portfolio is a smart move. An even smarter one is working with your broker to identify target areas for diversification and to protect against risk.
First, let’s walk through some changes to watch throughout the first quarter of the year. Then we’ll explore how these policy changes may impact your company’s strategies for financing and capital sourcing.
Immigration
The President ran on a platform of strict immigration policy, promising to construct a border wall and enforce mass deportations. Aside from the direct costs associated with immigration policies, mass deportations will impact the labor market.
For businesses, this means shoring up labor is a priority. Businesses that have the capital to attract and retain high quality team members will be situated well in the new competitive environment.
Tariffs
During his campaign, the president proposed a 25% tariff on goods from Canada and Mexico, based on a claim that demand for illicit drugs in the US is driven by smuggling across these borders. Trump wants to maintain tariffs until these countries can stop the flow of drugs.
Oil and other petroleum products cross the Canadian border to the tune of several million gallons a day. Tariffs will likely restrict this energy supply to some extent. Oil and gas will likely increase exploration in the US, and jobs can be created in that field, but it takes time to increase production and to realize revenue through a relatively long process from extraction to final product.
Canada and Mexico are not the only countries targeted for tariffs. China could see the highest, receiving a 60% tariff on Chinese imports. American retailers and manufacturers will have to grapple with how to handle price adjustments.
Will additional costs be passed on to retailers and consumers, or be accepted as a new cost of doing business and decrease profit margins? Or will the fallout result in a new market for American made goods and raw materials? With each of these options, companies that have the buying power to negotiate price, buy in bulk, and buy from multiple providers will retain a strong competitive advantage.
Healthcare
There’s every indication that Trump will shake up healthcare policy in his second term. Contrary to a mostly deregulatory stance elsewhere in his administration, he will likely enact new changes to healthcare subsidies, Medicaid, and vaccination regulations.
Some policy changes could promote drug transparency and competition, which could drive pharmaceutical prices down. Medical technology companies could also see a boon in the form of development with reduced federal oversight, which has driven some of the cost of innovation in healthcare. Shifting to a domestic supply chain may also impact overhead costs for hospitals and providers.
Climate
Trump has been very vocal in his opposition to Biden’s environmental regulations and climate policy. He’s also supportive of expanding oil and gas production. While it’s unlikely we’ll see a full course reversal on all forms of renewable energy, the new administration can take several actions, such as cutting funding for the EPA, blocking environmental justice initiatives, and pulling out of the Paris Agreement.
Federal deregulation like this could leave the way open for states, cities, and business leaders to pursue climate policies of their own. Opportunities can also be found in several bipartisan bills like the Carbon Removal and Efficient Storage Technologies Act (CREST) and the Concrete Asphalt Innovation Act, which could increase competition for low-carbon products and open opportunities for industry growth.
Deregulation may have positive impacts on energy pricing and operating costs, but the extent of change has yet to be realized.
Financing & Capital Sourcing Strategies
Much remains to be seen as the regulatory environment unfolds. We are entering uncharted territory with a lot of shakeups across the board. Given this uncertainty, the best way to remain resilient moving into the new administration is to ensure that you have flexible and rapid access to capital.
In most industries, business leaders are preparing to adapt. We don’t know when or to what extent these changes will impact the market, but we do know that businesses that are unprepared for change may face significant downside. Rapid, flexible access to capital is important in order to respond to changes in the market.
That often means sourcing financing such as lines of credit and cash-flow-accelerating financial vehicles like invoice, purchase order, and contract factoring. Flexible capital provides the means to quickly execute new business strategies, whether that be hiring contingent labor, changing your in-store product mix, or covering short-term increases in energy cost.
Here are some examples of how having access to flexible financing might help a business to gain a competitive edge in the market:
Staff Shifts: If changes in immigration policy were to suddenly decrease the staff size at a farming operation, that farm might need to rehire in order to run at full capacity. If this were to happen during harvest season and the farm were not to have access to enough capital to rapidly hire more local labor, it could result in losing some of that year’s crop and reduced production. Having flexible financing solutions already in place to could enable immediate access to funds for restaffing, as well as covering other variable expenses.
Demand Shifts: If high tariffs were to suddenly increase the demand for American Made Goods, a US based manufacturer might have an opportunity to rapidly win new contracts with retailers. However, if that manufacturer can’t access the capital needed to buy more raw materials, hire more labor, and purchase new equipment, they might not be able to increase capacity quickly enough to bid on those contracts. Again, the right flexible financing solution could play a pivotal role in supporting the rapid growth of this company.
Practical & Cost Effective: Proactively securing capital access is a practical step in times of uncertainty and rapid market shifts. But simply having access to financing doesn’t mean that a company needs to use that financing. For example, interest is typically paid on a commercial line of credit only to the extent that the line is drawn. If the funds are not needed and hence not withdrawn, the borrower doesn’t pay any interest. But if the market shifts and funds are needed, then the company has guaranteed, immediate access to capital to finance its new growth strategies.
This is why so many of our brokers are sourcing credit financing for their clients during the first quarter of 2025. With available access to credit, these US businesses can draw when capital is needed, and move swiftly to act on emerging opportunities.
Now is the time to talk to your financing about building capital flexibility in your business so you’re prepared to take advantage of the opportunities ahead. Plan a consultation to ensure resilience in your portfolio and remove liabilities before the new year starts.
Recent Comments