Divided government with a Trump White House: What it means for business
While key economic indicators provide some optimism about the economic outlook, forecasts and US macroeconomic data have been all over the map in the months leading up to the election. Some worries about the labor market eased after September’s jobs report came in higher than expected, but the manufacturing sector continues to contract. This economic volatility and a tense geopolitical landscape add to the uncertainty around the election.
The results of this election could mean a limit on major change coming out of Washington. Should Donald Trump win while Democrats take control of the House, Trump would face steep barriers to the most ambitious parts of his agenda — meaning fewer large-scale legislative changes to the business environment.
This would not be a major surprise to business leaders. In our October 2024 Pulse Survey, 76% of the US executives responding agreed or strongly agreed that there would be a divided government after the election. In addition, 77% expected an increase in executive orders and 75% expected both more regulation and litigation, regardless of who won the election.
Trump’s promises of tax cuts during the campaign might be difficult to push through with a Democratic-controlled House. But trade policy will likely impact US businesses, depending on the degree to which President Trump follows through on his campaign promises regarding tariffs. Widescale tariffs can be issued through executive order, though they would almost certainly be challenged in court. Trump campaigned for universal tariffs of at least 10%. If that were to pass, 75% of executives in our survey agree or strongly agree that a 10% universal tariff on imports (as proposed by Trump) would significantly hinder their growth.
Other economic policies that might come out of a Trump White House include increasing energy production through expanded drilling, reducing regulation and scaling back renewable energy policies. Trump would have to reach across the aisle to secure moderate votes to pass any major legislation.
In our October 2024 Pulse Survey, 76% of the executives surveyed expected the election would result in divided government. Nearly as many (74%) predicted this outcome would improve their company’s risk profile, presumably because shared power would serve as a check on policy overreach by either party. Even so, similar numbers anticipate more business litigation, regulation and executive orders (EOs) regardless of who’s president. Almost as many (71%) believe post-election trade and tax policies will hurt US competitiveness, regardless of who’s in the Oval Office.
Under a Donald Trump administration, executives in our survey said economic policy, foreign relations, the antitrust/competition environment and technology, artificial intelligence (AI) and data regulation would be among the top policy risks to their company. A Democrat-controlled House would likely challenge Trump administration efforts on these and other priorities, reducing the chances for major legislation and forcing the White House to rely heavily on EOs to implement its agenda. The House would also likely challenge the administration’s efforts through oversight hearings and inquiries.
Without new federal legislation, we will likely continue to see states filling the void in key policy areas like climate, AI, privacy and tech regulation, as well as reproductive rights. Another check on White House policy will be the Supreme Court’s repeal of the Chevron doctrine, as well as other recent decisions that limit the powers of regulatory agencies.
We do expect movement on some issues with bipartisan support, including China, national security, AI, industrial policy and supply chains, trade, energy independence, privacy and cybersecurity. In many cases, however, the parties may agree on the high-level objectives but not necessarily the means to get there. Finding consensus on legislation will require considerable effort and pressure from stakeholders.
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Financial services (FS) executives won’t be surprised if the major political parties wind up sharing power. In our October 2024 Pulse Survey, they told us they expected the election to produce a divided government (82% versus 76% for all respondents), and 74% said that would improve their company’s risk profile. Should Donald Trump win the White House, a divided government would stymie his ability to implement economic plans, including a proposed 10% universal tariff on imports. Trump would probably have to turn to executive orders to implement policy. He may also move quickly to replace the heads of the Consumer Financial Protection Bureau and the SEC and the US Attorney General, who runs the Department of Justice.
Given the continued resilience of the US economy, FS executives may be reassessing their acquisition and divestiture plans. In our survey, 84% of FS executives said the election will affect, either somewhat or to a great extent, their company’s business decisions about deals. Federal antitrust regulators would likely be less active under a Trump administration, though major changes in antitrust policy likely wouldn’t come right away. The Federal Trade Commission may adjust its regulatory priorities with a Republican commissioner elevated to chairman by Trump, but he or she wouldn’t be able to override the five-member commission’s Democratic majority. Still, deal activity may soon increase knowing that under Trump regulators will be more open to mergers.
Regardless of the election outcome, FS executives are still focusing on technology modernization and have indicated plans to continue investing. Technology will likely remain a perennially big budget item in FS considering its potential efficiency gains through hyperautomation as well as its possible boost to competitiveness, compliance and growth.
The election isn’t changing expectations for more rules. Roughly three-quarters of FS executives in our survey said they expect more regulation (76%) and executive orders (72%) no matter who wins.
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If Donald Trump wins the White House alongside a Republican Senate and Democratic House, he’ll be in a strong position to push forward several healthcare priorities he championed during his campaign. These initiatives include deregulation and market competition along with expanded flexibility for individuals and states.
Through the executive branch alone, a Trump administration might use executive orders (EOs) or work with federal agencies to revise or establish regulations. He’d likely redirect AI oversight toward self-regulation, allow more choices in healthcare plans and give states more control over how they manage programs like Medicaid.
Trump could, however, encounter significant hurdles in pushing forward other key priorities that require congressional action in areas where there is less or no bipartisan support. Examples include strengthening Medicare by safeguarding its finances, passing legislation that supports deregulation efforts and confirming the privatization of certain aspects of the Department of Veterans Affairs. With a divided Congress, these initiatives might face strong opposition, with Democrats advocating to improve Medicare and resisting the reinstatement of Trump’s deregulation agenda.
Other Trump priorities with bipartisan support may face fewer challenges. Examples include emphasizing domestic production, confirming the nation's independence in essential goods and enhancing access to primary care and services that allow seniors to remain at home.
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In our October 2024 Pulse Survey, 76% of executives predicted a divided government. While a Donald Trump presidency could mean a push for lower corporate taxes and aggressive trade policies, a Democratic House would likely moderate these measures. This may be why 74% of executives said divided government would improve their risk profile.
A Trump administration would likely attempt to lower corporate tax rates but increase tariffs across the board. Trump’s aggressive stance on trade, particularly with China, remains a key concern for executives. Seventy-four percent said the outcome of the election would affect their trade decisions somewhat or to a great extent. Trump plans to impose substantial tariff increases on products from China and Mexico, especially origin vehicles and key goods. Imports from other countries will likely face standard tariffs of 10% to 20%. Companies with manufacturing in Mexico may encounter new barriers, creating uncertainty for global business decisions and likely raising costs for many US imports.
The bipartisan consensus on China suggests that duties on Chinese tech goods and components are likely to remain in place. This ongoing tariff policy, combined with Trump’s protectionist agenda, could strain global supply chains. The United States-Mexico-Canada Agreement (USMCA) is another area where North American trade could be reshaped. Companies should consider adjusting their sourcing manufacturing and footprint strategies to mitigate disruptions, particularly in the semiconductor space, where national security concerns and tariffs have already led to significant shifts in investment and manufacturing.
Regulatory pressures will remain a key challenge for the TMT sector. As both parties focus on national security, regulatory oversight will likely increase, especially around cybersecurity. The sector should prepare for an increasingly litigious business environment, with antitrust cases and regulatory hurdles expected to intensify. While a Trump administration might deprioritize sustainability regulations in the US, Europe’s focus on carbon emissions will still push TMT companies to continue investing in sustainability to meet global regulatory requirements.
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A divided government wouldn’t be surprising to business executives. According to the October 2024 Pulse Survey, 76% of executives responding said they expect it. Should Donald Trump win and Democrats take control of the House, there’s a heightened potential for more executive orders (EOs) to circumvent an oppositional House. In fact, 77% of executives surveyed expect more EOs regardless of who wins the White House.
Under a Trump administration, there could be greater scrutiny of regulations that have been finalized or proposed for implementation under the Biden/Harris administration. To that end, the Cybersecurity and Infrastructure Security Agency (CISA) issued a proposed rule to implement reporting requirements under the Cyber Incident Reporting for Critical Infrastructure Act of 2022 (CIRCIA). With the rule yet to be finalized, there could be an accelerated effort from Trump to make adjustments and limit which entities qualify as critical infrastructure.
All in all, a Trump administration would probably look to reduce regulations, removing perceived burdens on the private sector. With a Democratic-controlled House, though, Trump would likely face opposition, especially if there are attempts to peel back existing rules. In the case of the SEC cyber disclosure rule — which Republicans weren’t all in favor of — how the SEC will apply and enforce the rule may shift.
Trump is likely to look to harmonize cyber regulations by reducing duplicative regulations. This would likely mean more reliance on market correction.
A bipartisan path a Trump administration might explore is the Cyberspace Solarium Commission (CSC), an advisory body formed in 2019. The CSC’s reports have contributed to cybersecurity policy recommendations that have been enacted into law. Respected by both parties, the CSC could be a source for agreement on private and public sector priorities.
Both sides will likely prioritize additional cybersecurity focus on artificial intelligence (AI), connected devices and critical infrastructure. Policy methods to align the industry on more robust cyber practices, however, could be at odds.
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The next Congress will likely prioritize tax policy, especially with key individual provisions of the 2017 Tax Cuts and Jobs Act (TCJA) expiring at the end of 2025 and several significant business tax provisions set to change.
On the campaign trail, former President Donald Trump has called for making permanent expiring TJCA individual income tax and estate tax provisions and has proposed lowering the 21% corporate income tax rate to 15% for companies producing goods in the US. The Republican party platform also calls for maintaining TCJA business provisions and pursuing additional tax cuts.
He has said his tax proposals would be offset by the increased economic growth they would generate. He has also proposed increasing federal revenues with a baseline tariff of at least 10% on all foreign-made goods and a 60% tariff on imports from China.
Still, should Trump win while the Democrats take the House, passing major tax legislation would face significant barriers and using budget reconciliation procedures would be unlikely. The Republican-only work product, the TCJA, was enacted using reconciliation under a joint House and Senate budget resolution that set a $1.5 trillion deficit-financing cap on the legislation for the initial 10 years the resolution covered. The December 31, 2025, sunset of individual tax provisions and other scheduled changes to business provisions were adopted to comply with these reconciliation requirements.
Divided control of government makes it harder to pass major tax legislation and will require compromises. Some tax increases could be adopted as part of a bipartisan agreement to address the expiring TCJA individual tax provisions and avert across-the-board tax increases. The next Congress could also revisit other recently enacted tax legislation, including clean energy tax credits and incentives that were enacted as part of the 2022 Inflation Reduction Act (IRA).
As debt concerns mount, the fiscal cliff becomes steeper, leaving Congress to look elsewhere for revenue. Business leaders will need to evaluate proposed tax policies for their potential effect on US economic growth and opportunities for US households should the TJCA extend or expire. The Congressional Budget Office (CBO) projects the federal budget deficit in 2025 to exceed $1.9 trillion, and interest costs will be $1 trillion. By contrast, in 2017, when TCJA was enacted, the deficit was $665.7 billion and interest costs were under $300 billion.
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How fast and how far might a second Trump Administration extend the US protectionist stance first established in 2018-19 with tariff hikes on Chinese imports (and left largely unchallenged during the Biden presidency)? This is a key consideration for US business. Former President Trump has placed tax and trade policy — specifically tariffs — at the center of an economic agenda to raise federal revenue, protect American jobs and promote reindustrialization.
How fast? Donald Trump has signaled intentions to use tariffs to jolt US relations with close trade partners and economic competitors alike should he win the White House. Trump is offering a carrot-and-stick approach, with a proposed 15% corporate tax rate as an incentive for domestic manufacturing alongside an across-the-board tariff of 10% or more on imports to induce further consideration of domestic production activities. He has also proposed a 60% tariff on imports from China. While the specifics behind an implementation plan for increasing tariffs were lacking during the campaign, the headline figure — 10% to 20% of all imports — could have significant effects on multinationals.
How far? By renegotiating NAFTA to create the United States-Mexico-Canada Agreement (USMCA) during his first term with a provision that the agreement must be reviewed in six years, Trump has shown a willingness to revisit long-standing trade arrangements. He’s tied US trade policy to its national economic goals. With the USMCA up for review in 2026, a Trump administration can be expected to introduce priorities on trade with Canada and Mexico over the next year. Separately, his campaign indicated that he aims to continue along some of the Biden administration trade policy trajectory. One example would be raising substantive barriers to importing Chinese electric vehicles.
A president can impose tariffs under many conditions, including unfair trade practices, without Congress. Congress nonetheless may push for certain provisions as part of its role in monitoring and oversight of US trade arrangements, for example, during the USMCA review period.
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The message from US executives ahead of the elections was clear. Businesses would be full steam ahead on artificial intelligence (AI), no matter who won. In PwC’s 2024 October Pulse survey, 53% said a Donald Trump victory would lead to increased AI investments. Fifty-two percent said the same about a Kamala Harris victory. In both scenarios, only 5% said AI investments would decrease. Since AI will be a foundational technology, like the internet — intrinsic to everything companies do — it’s bigger than any election. The technology will keep advancing. The value it creates for business will keep multiplying too.
But this election does matter. Trump has indicated a potentially lighter touch toward regulating technology, including a promise to repeal President Biden’s executive order on AI. It's unlikely that a strict regulatory framework, such as the European Union’s AI Act, could pass this Congress or escape a Trump veto. This lighter touch might please both technology company leadership and CIOs.
A Trump administration could also impact critical elements of the AI supply chain — energy and computational power. The systems that support AI and cloud require vast and growing amounts of electricity. While the Biden administration had sought to advance renewable energy initiatives, a Trump administration would probably take a more hands-off approach. Many AI-related systems also depend on a global supply chain, which could suffer if trade tensions rise.
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In our October 2024 Pulse Survey, 74% of executives responding said divided government would improve their organization’s risk profile, likely a sign they believe shared power will force both parties to compromise on any major legislation. That said, the executives agreed or strongly agreed there would be more regulation (75%), litigation (75%) and executive orders (77%), regardless of who is in the White House.
A second Trump administration would likely build on many policy proposals of the first one. Former President Donald Trump would likely make a strong push to boost the traditional US energy sector, which could be a setback to sustainability and renewable energy efforts. Without a Republican trifecta in government, a second Trump administration might focus its efforts at the agency level by rolling back Biden-era environmental regulations that raised costs for oil and natural gas companies and restricted drilling on federal lands. Federal agencies led by Trump -appointed personnel would likely prioritize permitting projects that aim to enhance domestic energy production, and the SEC would likely curtail proposed disclosure rules tied to a range of sustainability topics. Trump has also proposed tariff increases, which could affect global supply chains and trade — and potentially the economy.
The future of the Inflation Reduction Act and other Biden-era climate policies remains uncertain. Repealing these laws would require congressional support, and many Republicans have already seen the positive impacts in their districts. However, Trump may choose to withhold or redirect funding to certain priorities to try and implement his agenda in the face of a divided Congress. The stance on electric vehicle subsidies under a second Trump administration is also unclear, adding another layer of unpredictability. Trump would also likely challenge environmental, social and governance (ESG) investing, perhaps by reviving an executive order making it harder for employers to offer ESG-focused mutual funds in corporate retirement plans.
To pass most major legislation, Trump and Republicans would likely need to reach across the aisle and enlist the support of moderates. There is the potential bipartisanship on certain sustainability issues. Many Democrats and Republicans want resilient supply chains, fair trade, US-based manufacturing and energy independence. Another area of agreement is the threat of electric vehicle (EV) imports from China. But meeting in the middle on legislation will require considerable compromise that both parties have struggled to demonstrate the last few years. Often the parties agree on the high-level objectives but not necessarily the means to get there. Regardless of the specific political outcome, business leaders should continue to consider sustainability risks and opportunities across their operations, products, supply chains and business models to address the threats to their long-term strategies as well as potential areas of growth.
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Federal antitrust regulators would likely be less active under a Trump administration, and major changes in antitrust policy probably wouldn’t happen right away. The Federal Trade Commission (FTC) might adjust its regulatory priorities to accommodate a Trump-appointed Republican chairman, but he or she wouldn’t be able to make immediate changes to the agency’s overall direction. This means any significant shifts in antitrust policy would develop gradually as leadership transitions and confirmations unfold. Any major changes would likely impact highly regulated sectors and industries, including pharmaceuticals, biotech and air travel.
The FTC and Justice Department under President Biden had been pursuing cases to crack down on a range of activities they saw as anticompetitive as they sought to broaden longstanding antitrust case law. Knowing that regulators are unlikely to continue these efforts long term may spur more dealmaking in the short term.
Regulators in the Department of Justice, the Department of the Treasury and the Department of Commerce, among others, have gotten more involved in reviewing and restricting international deals. A broad US political consensus that viewed globalization and increasing free trade as generally positive began to unravel in the 2010s. More populist initiatives, including a renewed focus on industrial policy, have added new wrinkles to cross-border M&A. International deals aren’t dead by any means, but they have gotten more complicated.
Trump has proposed higher tariffs on imports. While it’s uncertain if and to what extent his tariff policy will be implemented, if carried out, this would likely impact the US deals market by altering the cost structure of companies reliant on imported inputs. Higher tariffs can increase operating costs, which could reduce profit margins and make businesses less attractive to potential buyers. Companies facing increased expenses also have reduced cash flow, limiting their ability to finance deals.
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The road ahead: How the 2024 election will impact your business
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