In the wake of the 2024 U.S. presidential election, all eyes are on President-elect Donald Trump as economists and analysts predict how his policies will reshape the U.S. economy. With trade strategies and deregulation efforts potentially poised to make significant waves at home and abroad, William Blair Macro Analyst Richard de Chazal delves into the opportunities and challenges that Trump’s economic priorities could have on inflation, mergers and acquisitions (M&A) activity, and consumer purchases.

Richard de Chazal, CFA, Macro Analyst, Equity Research
What key factors will determine the impact of Trump's policies on the U.S. economy?
The degree of impact Trump's policies may have will depend on their specifics and implementation timeline. Key areas include tariffs, which some view as a short-term negotiation tool while others welcome the longer-term revenue. Still, they could also reorder the global economy and pose inflation risks. Deregulation might boost growth, especially for smaller companies. Mass deportations, meanwhile, could raise labor costs and reduce consumption. The administration's approach to inflation involves balancing potentially inflationary policies with disinflationary measures, such as deregulation and increased energy production. Resolving conflicts in Ukraine and the Middle East could help stabilize the geopolitical landscape and shape economic outcomes. While there is plenty of uncertainty, the overall economy is currently in good shape with strong balance sheets, low unemployment, and moderating inflation; there is room for optimism.
What influence may Trump’s proposed trade policies have on the U.S. and global economies?
The administration's approach to tariffs is part of a broader strategy to restructure global trade patterns. By imposing tariffs, Trump aims to encourage domestic production and reduce reliance on strategic foreign imports. This could lead to shifts in global supply chains, with countries like China setting up factories in other parts of Asia, Mexico, or the U.S. to avoid U.S. tariffs. Yet, these tariffs, particularly on imports from countries like China, could lead to higher prices for goods and retaliatory actions, introducing uncertainty to the market.

Businesses may be unsure about future costs and supply chain stability, which can affect investment decisions and economic growth. While tariffs can be a tool for achieving specific economic goals, they also come with risks and trade-offs that need to be carefully managed to avoid negative impacts on the economy.

The inflationary impact of tariffs is a major concern for financial markets, as they could lead to higher overall inflation rates and interest rates if they start to destabilize what are still well-anchored longer-term inflationary expectations. Additionally, tariffs generally tend to be regressive, meaning they disproportionately affect lower-income segments of the population.
What strategies will the Trump administration use to manage inflation while promoting economic growth?
As mentioned, tariffs, particularly on imports from China, could lead to higher prices for goods. At the same time, deportations could reduce the available labor force, increasing labor costs and inflationary pressures in an already tight labor market. The administration has said it intends to implement disinflationary policies to counteract these effects. A key measure includes deregulation, which could significantly lower the cost of production—particularly for smaller businesses—and help boost economic growth in the process. Smaller businesses are the largest employers in the country.

Increased energy production is another significant disinflationary policy, as it could raise supply, lower energy costs, and reduce overall inflation. The administration is also seeking to leverage efficiencies from the newly created Department of Government Efficiency, an advisory committee led by Elon Musk and Vivek Ramaswamy to help streamline government operations and reduce costs.

A key measure includes deregulation, which could significantly lower the cost of production—particularly for smaller businesses—and help to boost economic growth in the process.

RICHARD DE CHAZAL, Macro Analyst


Additionally, resolving geopolitical conflicts, such as those in Ukraine and the Middle East, could help lower global commodity prices, further easing inflationary pressures. If Trump succeeds in ending Russian hostilities against Ukraine, it could result in a “peace dividend,” in which countries benefit from the cessation of hostilities. For example, both countries could potentially resume trade unimpeded by sanctions or restrictions.
How might the Trump administration's approach to regulation and antitrust measures impact M&A activity?
The Trump administration is keen on deregulation. While it is difficult and time-consuming to actually repeal existing legislation, departments can, at the very least, de-emphasize that regulation. The most obvious beneficiaries will be those industries most impacted by regulatory barriers, including the energy and financial sectors. The defense industry is another sector likely to benefit from this direction, as the administration sees it as a key strategic area for reform. Additionally, the administration anticipates greater foreign demand from European NATO countries as they boost defense spending to meet agreed targets and strengthen relationships with a very transactional new President Trump.

While M&A activity has seen recent improvement, it still hasn’t fully recovered to the heights of 2021. The Biden administration was known for being very pro-regulation and took a firm hand when it came to antitrust measures. Yet, what is perhaps surprising to many is that the Trump administration also takes a similar view of antitrust legislation when it comes to Big Tech, and many within the Trump camp were also fans of the Commissioner of the U.S. Federal Trade Commission, Lina Khan. Hence, we may see little change in sentiment around this specific area of the market.

We see incredible scope for improved M&A activity around the middle-market area. The Trump administration firmly believes that regulation has been a major barrier to innovation and growth in the small- and mid-cap areas of the market and feels that rapid deregulation, in addition to tariffs and further tax cuts to protect these industries, will be key in unleashing pent-up demand. Now that the elections are over, we see plenty of optimism growing in the corporate sector around the prospects for dealmaking in the coming year.
Considering all the factors discussed, do you anticipate consumer behavior will change in 2025?
Consumer behavior is expected to be shaped by several factors, including economic conditions, interest rates, and trade policies. For large purchases, such as homes and vehicles, the impact of rising interest rates over the past few years will continue to play a significant role. Even with potential rate cuts, new homebuyers may still face high mortgage rates, around 6.5%-7%, which could continue to restrain growth in the housing market, discouraging existing homeowners from listing their properties and losing their prevailing fixed rates. This may temper the enthusiasm for new homebuyers. In the automobile industry, tariffs on auto parts, which cross the Canadian and Mexican borders multiple times during production, could increase costs and reduce consumer demand. The resulting increased prices for new vehicles may potentially boost demand for used cars instead.