Policy Perspectives
This hub explores proposed policies, economic implications and investment implications. It should be noted that this is all highly speculative and merely a broad baseline for some of the policy changes that may be implemented. Any presidential candidate is likely to promise exhaustive and expansive policies on the campaign trail but is then constrained by the realities of the legislative process. The Trump Administration enjoys majorities in both chambers of Congress; however, these majorities are admittedly slim and many competing interests and priorities exist within the party.
Policy proposal
The rise in bond yields throughout 4Q24 and into 2025 likely reflects some degree of concern about the unbalanced state of U.S. federal finances. The deficit as a share of GDP sits at 6.4%, nearly double the 50-year average. Debt to GDP has climbed to nearly 100%. The only avenues to improve federal finances are to cut spending or to raise more revenue.
To that end, the Administration has informally established the Department of Government Efficiency (DOGE) “to dismantle government bureaucracy, slash excess regulations, cut wasteful spending and restructure federal agencies.” DOGE’s original goal was to cut USD 2 trillion in spending immediately, although that has since been curtailed to USD 1 trillion. However, looking underneath the USD 7 trillion budget for 2025, there are fewer areas to trim than one might expect. Net interest payments must be made. Although social spending programs like Social Security, Medicare and Medicaid were highlighted as areas in need of reform, dramatic cuts would be deeply unpopular. Removing mandatory spending leaves about 25% of the budget, half of which includes defense spending. Finding efficiencies could be challenging in such a short time frame, although feasible over a longer period.
The other option is to raise more revenue. Tariffs have been floated as one mechanism to do so. However, tariffs only account for USD 76 billion in revenue currently, and while prior to the 1930s that was not the case, they would have to be raised exponentially to become a significant revenue source. Income taxes are the largest source of revenue, but the extension of the Tax Cuts and Jobs Act will only diminish that.
All told, the Committee for a Responsible Federal Budget projects that the extension of the Tax Cuts and Jobs Act could add USD 5 trillion to the deficit, additional proposed tax cuts could add USD 4 trillion, but tariffs could offset those increases by USD 2.7 trillion over the next decade. This could result in a USD 7 trillion increase to the deficit over the next ten years.
Economic implications
- Excessive deficits and debt could slow economic growth and push up inflation.
Investment implications
- Treasury yields could rise further as investors demand more compensation for holding U.S. government debt, which could be perceived to carry more risk given the state of federal finances.
The 2025 federal budget
USD Trillions

Federal deficit and net interest outlays
% of GDP, 1973-2034, CBO Baseline Forecast

Source: CBO, Treasury Department, J.P. Morgan Asset Management; (Left) Numbers may not sum to 100% due to rounding; (Top and bottom right) BEA. Estimates are from the Congressional Budget Office (CBO) June 2024 An Update to the Budget Outlook: 2024 to 2034. Total government spending and sources of financing reflect actual data for fiscal year 2024 sourced from the September 2024 Final Monthly Treasury Statement. “Other” spending includes, but is not limited to, health insurance subsidies, income security and federal civilian and military retirement. Years shown are fiscal years. All CBO estimates are adjusted by JPMAM to reflect GDP revisions resulting from the 2024 annual update of the National Economic Accounts. *TCJA refers to Tax Cuts and Jobs Act. Adjusted by JPMAM to include estimates from the CBO May 2024 report “Budgetary Outcomes Under Alternative Assumptions About Spending and Revenues” on the extension of TCJA provisions. Forecasts are not a reliable indicator of future performance. Forecasts, projections and other forward-looking statements are based upon current beliefs and expectations. They are for illustrative purposes only and serve as an indication of what may occur. Given the inherent uncertainties and risks associated with forecasts, projections or other forward-looking statements, actual events, results or performance may differ materially from those reflected or contemplated.
Guide to the Markets – Asia. Data reflect most recently available as of 31/12/24.
All figures are in U.S. dollars.
Policy proposal
The Administration has suggested it would like to pass an omnibus budget reconciliation bill, which is the one budgetary vehicle with immunity from Senate filibusters, in the spring. Given slim majorities in Congress, this is the most likely path for tax reform. We anticipate consideration of significant tax cuts, which could include:
- Full extension of the 2017 Tax Cuts and Jobs Act (TCJA) cuts that were set to expire at the end of 2025.
- Corporate tax cut from 21% to 15% for domestic production, and a restoration of full expensing of R&D and equipment purchases for domestic producers.
- Change in the USD 10,000 cap on State and Local Tax (SALT) deductions.
- Exemptions from income tax for all social security, tips and overtime income.
Of these proposals, a full extension of the TCJA, with a few changes seems most likely. However, the chance of passage of many of these individual proposals may be reduced by objections to the cost of the total legislative package. Congress will very likely attempt to reduce the costs of these proposals by, for example, raising rather than eliminating the cap on SALT deductions, pushing for new policies like limiting SALT for corporations and eliminating many tax credits created by the Inflation Reduction Act.
Economic implications
- Growth: Real GDP would be largely unaffected in 2025, but powerful fiscal stimulus from tax cuts kicking in at the start of 2026 could boost year-over-year real GDP growth to 2.8% by the end of 2026.
Investment implications
- A corporate tax cut for domestic producers could mimic the now defunct Section 199 domestic production activities deduction, in which manufacturing and information technology benefitted the most. Finance, health care, education and other services received little benefit.
- Corporate profits of domestic producers could experience a tailwind to margins. 145 companies in the S&P 500 (representing 18% of market cap and 23% of earnings) have effective tax rates greater than 15% and greater than 80% of revenues derived domestically. Stripping out the 51 companies in traditionally service sectors, roughly under one-fifth of the S&P 500 could benefit. More mid and small cap companies, which tend to be more domestically oriented, may qualify for this tax cut.
# of S&P 500 companies with effective tax rates >15% that generate >80% of revenues domestically

Source: Standard & Poor's, J.P. Morgan Asset Management. Based on data available for 456 of 503 companies in the S&P 500. Data are as of November 13, 2024.
All figures are in U.S. dollars.
Policy proposal
The President has proposed a 60% tariff on all Chinese goods and a 10-20% universal tariff on all imports, along with a slew of other measures on prominent trading partners like Canada and Mexico. Some measures, particularly toward Canada and Mexico, could be construed as negotiating tools, opening the possibility for trade deals. Others, perhaps those directed toward China, could have longevity. Tariffs imposed on China during the first Trump Administration have yet to be repealed, even under a different administration.
Economic implications
- Growth: Tariffs would reduce both imports and exports. If foreign nations retaliated with equivalent tariffs, both sides of U.S. trade could decline by equivalent percentages. Because the U.S. imports more than it exports this could add to economic growth. However, the impact of a trade war in slowing the global economy and the uncertainty and disruption caused by a further need to reroute supply chains, would likely more than negate this effect.
- Inflation: U.S. goods imports makes up 17% of consumer spending, so the higher cost of goods could be inflationary. Headline PCE inflation could rise to 2.7% y/y by 4Q25 in a one-time feed-through effect from tariffs and then drift down to 2.1% y/y by the end of 2026.
- Deficit: According to the Committee for a Responsible Federal Budget’s central estimate, tariffs could raise USD 2.7 trillion between 2026-2035. However, this does not include impacts to growth from retaliation or less consumer spending that could impact the deficit as a share of GDP.
Investment implications
- Uncertainty and the potential for higher rates and inflation could result in a stronger U.S. dollar, which has already been the case since the election.
- Uncertainty could foment market volatility. In 2018, a tit-for-tat trade war weighed on equity multiples despite solid earnings across most major global equity markets, producing negative returns.
- Large multinationals could face headwinds, particularly in sectors with the highest share of foreign revenue, such as technology and materials. Small caps, which tend to be more domestically oriented, should benefit on a relative basis.
- International stocks, bonds and currencies may be most vulnerable, demonstrated in 2018-2019. China in particular stands to suffer. However, over time, EM Asia ex-China is poised to capture greater share of global trade and, along with Mexico, could be destinations for friendshoring and nearshoring, respectively.
- The first bout of trade tensions undermined business confidence, subduing capex.
Average tariff rate on U.S. goods imports for consumption
Duties collected / value of total goods imports for consumption

Source: Tax Foundation, United States International Trade Commission, U.S. Department of Commerce, J.P. Morgan Asset Management. *Imports for consumption: goods brought into an economy for direct use or sale in the domestic market. Includes all current official revisions for 2010-2020 as of July 2021. **Estimate is by the Tax Foundation as of October 2024. May not be updated as of the latest announcements regarding tariffs and U.S. trade policy and is subject to change. Forecasts are based on current data and assumptions about future economic conditions. Actual results may differ materially due to changes in economic, market and other conditions.
Guide to the Markets – Asia. Data reflect most recently available as of 31/12/24.
Policy proposal
The Biden administration passed nearly 80% more financially significant rules (estimated to have USD 100 million or more impact to the economy; threshold raised to USD 200 million in 2023) throughout its term than the Trump administration did during its first term, according to George Washington University. The Trump administration is likely to attempt meaningful deregulation this time around.
The first step may be to impose a regulatory freeze, as many incoming presidents do, to assess the impact of regulations underway to determine whether to proceed with them depending on if they fit into his policy agenda. President Trump is also likely to reinstate the regulatory budget framework to promote annual cost savings, and more stringent cost-benefit analysis for regulations going forward. During his first term, the President directed agencies to eliminate two rules for each new one created. He has proposed to increase that to eliminate 10 rules for each new one.
From there, key targets of potential deregulation include:
- Finance: Post-financial crisis era regulations, Basel III and crypto assets could face some deregulation.
- Energy: The administration will likely remove restrictions on leases and permitting for oil and gas drilling. It has also proposed to rescind unspent funds from the Inflation Reduction Act, remove subsidies on renewables and electric vehicles, and roll back environmental protections.
- Health care: A long-standing goal of the President was the repeal the Affordable Care Act.
- Technology: Technology may continue to come under intense scrutiny, but focus may shift towards issues like free speech and competitiveness rather than wholesale breakups of tech companies. Influential tech leaders may emphasize an open environment for artificial intelligence (AI) development that enables the U.S. to maintain its competitive edge. The Administration could expand the semiconductor export restrictions introduced during the Biden administration and increase incentives for domestic chip manufacturing.
The realities of deregulation, however, may be more sobering. It is easier not to add new regulation than to eliminate it. Not only does proposed deregulation need to go through a formal review process but it is also subject to judicial review, which has a mixed success rate.
Economic implications
- Productivity: Deregulation should boost productivity and support growth; however, any such gains are very hard to estimate.
- There could be long-term impacts to environmental and climate sustainability, as well as consumer protections.
Investment implications
- Mega cap technology companies may continue to face anti-trust litigation, although the strategic importance of many of these businesses may also protect them and limit the scope of legal action, somewhat diminishing the regulatory headwind.
- Financials stand to benefit from a rollback of post-financial crisis era regulations and Basel III.
- Energy could also benefit, although with oil production already at high capacity, this may not result in a meaningful increase in oil supply in the short run. On the other hand, renewables and electric vehicles (EV) subsidies enacted in the Inflation Reduction Act could be at risk.
- Thus far, markets have not rewarded health care for any prospects of regulatory regime change, and the Administration’s cabinet appointee has not been well-received by the markets at this stage.
- Crypto guardrails could diminish through less U.S. Securities and Exchange Commission (SEC) enforcement and a relaxed regulatory framework for digital assets.
- Streamlined regulation and greater clarity could revive Initial Public Offerings (IPO) and Mergers & Acquisitions (M&A), creating much needed exit activity in private equity, and supporting lending and financing activity in private credit.
Economically significant rules published by administration in first year
Cumulative number of rules

Source: George Washington University's Regulatory Studies Center, Office of the Federal Register for Biden administration, Office of Information and Regulatory Affairs for all prior administrations, J.P. Morgan Asset Management. Data are as of September 6, 2024.
All figures are in U.S. dollars.
Policy proposal
Immigration efforts could prioritize increasing border security, deporting undocumented immigrants with criminal convictions and final deportation orders, and slowing or restricting legal avenues to immigrate.
Economic implications
- Jobs: Lower labor force growth due to less immigration could cut the unemployment rate to 3.9% by the end of 2025. Wages could face upward pressure as native born workers’ median wages are higher than foreign born workers.
- Growth: Over time, economic growth could be limited by constrained labor force growth.
Investment implications
- Companies could continue struggle to find enough qualified workers, a longstanding challenge.
- Higher wages could weigh on profit margins.
Labor force growth, native and immigrant contribution
Year-over-year difference, end of year, aged 16+, millions

Median weekly wages
2023 (in U.S. dollars)

Source: BLS, FactSet, J.P. Morgan Asset Management. Labor force data are sourced from the Current Population Survey, also known as the household survey, conducted by the BLS. This survey does not ask respondents about immigration status and may include undocumented workers, although it likely undercounts the undocumented population. Data are as of December 19, 2024.
All figures are in U.S. dollars.
Political opinions are best expressed at the polls, not in a portfolio. One cardinal rule investors ought to follow: Don’t let how you feel about politics overrule how you think about investing.
The chart below shows a survey from the Pew Research Center asking Americans how they feel about economic conditions. The results show that Republicans often feel better about the economy under a Republican president, while similarly Democrats often feel better about the economy under a Democratic president. Investors often make portfolio decisions based on their economic outlook.
Yet, average annual returns on the S&P 500 during the Obama administration of 16.3% and during the Trump administration of 16.0% were almost identical and higher than the average return over the last 30 years of 10.4%. It is likely the macro conditions, like ultra-low interest rates enjoyed during both Obama and Trump administrations, were a more influential driver of above-average returns during those periods, rather than the policy prescriptions each president espoused.
Consumer confidence by political affiliation
Percentage of Republicans and Democrats who rate national economic conditions as excellent or good

Source: Pew Research Center, J.P. Morgan Asset Management. The survey was last conducted in September 2024. Pew Research Center asks the question: “Thinking about the nation’s economy, How would you rate economic conditions in this country today… as excellent, good, only fair, or poor?” S&P 500 returns are average annualized total returns between presidential inauguration dates and are updated monthly. Data are as of December 31, 2024.
Key Policy Slides

Deep dive: Tariffs and Trade
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The information presented is not intended to be making value judgments on the preferred outcome of any government decision or political election.