Donald Trump started his second term as President on Jan. 20, 2025, following his amazing political comeback with a victory in the November election. The new administration is set to bring a wave of significant policy changes. While tax cuts and deregulation are expected to fuel economic growth, policies such as tariffs and mass deportations may add to rising inflation.
Key Trump Policies and Promises
Tariffs and Trade Policy
Trump plans sweeping tariffs to boost American manufacturing. A 25% tariff on imports from Canada and Mexico is slated, citing concerns over drug trafficking and illegal immigration. Additionally, a 10% tariff on Chinese goods is scheduled for Feb. 20, 2025. While aimed at strengthening domestic industries, these measures may increase trade tensions and disrupt global supply chains (read: Trump Tariffs on Canada and Mexico Put These ETFs in Focus).
More than 83% of Mexican exports and 75% of Canadian exports head to the United States, making these tariffs a huge threat to their economies. The tariffs could also disrupt Asian auto and electronics manufacturers that rely on Mexico as a low-cost production hub for U.S. markets. The move puts focus on exchange-traded fund (ETF) First Trust S-Network Future Vehicles & Technology ETF CARZ, which might see a decline in price.
Buy American and Hire American
Since small caps generate most of their revenues from the domestic market, they are more closely tied to the U.S. economy and its increased hiring. These have lower foreign exposure and are thus less impacted by global growth slowdown. This will make small-cap ETFs like iShares Russell 2000 IWM winners.
Also, with Trump’s tendency to bring U.S. manufacturing jobs back to the country and strictly oppose outsourcing, First Trust RBA American Industrial Renaissance ETF AIRR, which focuses on small- and mid-cap U.S. industrial and community banking companies, is expected to benefit.
Deregulation and Energy Policies
Taking a completely difference stance from former president Biden, Trump pushes for more fossil fuel generation, be it from crude oil, natural gas or coal. Plans include expanding drilling and mining on public lands and dismantling existing environmental regulations to achieve energy independence.
This, in turn, may hit low carbon and clean ETFs like iShares MSCI ACWI Low Carbon Target ETF CRBN and First Trust NASDAQ Clean Edge Green Energy Index Fund QCLN, while fossil fuel-related stocks and ETFs like Energy Select Sector SPDR ETF XLE should gain.
Tax Reforms
Building on the 2017 Tax Cuts and Jobs Act, Trump’s administration is expected to push for additional individual and corporate tax cuts. While details remain undisclosed, these measures aim to stimulate economic growth and boost corporate profits.Large-cap growth ETFs like iShares Russell 1000 Growth ETF IWF are the likely beneficiaries.
Cryptocurrencies
In a significant shift, Trump has promised a more crypto-friendly regulatory environment. His administration aims to position the United States as “the crypto capital of the planet.” Paul Atkins, known for his crypto-friendly stance, has been nominated as chair of the Securities and Exchange Commission. Additionally, Trump plans to establish a national Bitcoin reserve, highlighting his commitment to the digital asset space. iShares Bitcoin Trust IBIT should be a clear gainer from this move.
Space Exploration
A shift in space policy is anticipated, with a stronger reliance on private companies. Trump is expected to favor SpaceX’s launch vehicles over NASA’s costly Space Launch System for Mars exploration. Trump’s close association with SpaceX CEO Elon Musk is expected to boost space investments. ARK Space Exploration & Innovation ETF ARKX can be a likely beneficiary.
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Energy Select Sector SPDR ETF (XLE): ETF Research Reports
iShares Russell 2000 ETF (IWM): ETF Research Reports
First Trust S-Network Future Vehicles & Technology ETF (CARZ): ETF Research Reports
First Trust NASDAQ Clean Edge Green Energy ETF (QCLN): ETF Research Reports
iShares Russell 1000 Growth ETF (IWF): ETF Research Reports
First Trust RBA American Industrial Renaissance ETF (AIRR): ETF Research Reports
iShares MSCI ACWI Low Carbon Target ETF (CRBN): ETF Research Reports
ARK Space Exploration & Innovation ETF (ARKX): ETF Research Reports
