The 2024 election will generate plenty of fodder for historians. Donald Trump has become the first president to return to the White House for a non-consecutive term since Grover Cleveland in 1892. This political comeback is even more remarkable given the legal challenges the former president faced during the campaign. And not only will Trump occupy the White House, but he will likely do so with a Republican majority in both the Senate and House of Representatives.
The policy shifts expected from the incoming Trump administration will generate huge volumes of work for accountants and consultants. While a victory for Democratic nominee Kamala Harris would have continued the status quo, Trump has promised sweeping changes to the tax code, business regulations, environmental policy and trade tariffs. It will be the task of financial professionals to help firms navigate this changing landscape.
Firms will benefit from a surge in demand across several key areas
And there is good reason to expect changes to come thick and fast. Although the outcome of the House elections has yet to be finalised, Republicans are on track to win. That will give the incoming president two years before the Democrats have their next opportunity to impede his agenda by regaining control of the House or Senate. Furthermore, Trump will not be constrained by a desire to win re-election, since the constitution bars a third presidential term.
Market reaction
The prospect of bold action was also reflected in the initial market reaction. The S&P 500 gained 2.5% and the Dow Jones 3.6% to hit new record highs. The yield on 30-year US Treasury bonds recorded its biggest jump since March 2020, and the US dollar rose by 1.9% against the euro in its biggest daily move since 2016. This combination signals that investors expect the Trump administration to boost economic growth through tax cuts and lighter business regulation. The downside of such growth-friendly policies is the risk of accelerating inflation, which would result in higher rates from the Federal Reserve.
The precise policy details for a second Trump term will need to be hammered out with Congress. But it is safe to assume that accounting and consulting firms will benefit from a surge in demand for their services across several key areas.
The corporate tax rate could be just the tip of the tax planning and compliance iceberg
One of the core policies of the president-elect’s platform has been a further cut in the corporate tax rate. The Tax Cuts and Jobs Act, implemented in 2017 during Trump’s first term, lowered the corporate tax rate from 35% to 21%. He has now proposed trimming this further to 15%. This would just fit within the framework of an OECD deal to set a global minimum tax of 15%, which came into effect at the start of 2024, that is designed to halt a decades-long race to the bottom in corporate tax rates. While a 15% levy in the US is technically in scope, it would add to pressure on others to cut – including Germany at 30% and the UK at 25% – to remain competitive.
However, the corporate tax rate could be just the tip of the iceberg in terms of the tax planning and compliance task facing companies, their chief financial officers and external advisers. As recent analysis by Deloitte underlined, Trump has spoken in favour of lowering the tax bills of companies investing in new equipment or research and development. A spree of changes to personal taxation – including the elimination of taxes on social security benefits and tips – could also impact payroll and tax reporting for companies.
Red tape
A second pillar of Trump’s plan for business has been to reduce red tape, and he has pledged to put Tesla and SpaceX entrepreneur Elon Musk at the head of a new ‘efficiency commission’. This roll-back of regulation would likely have the greatest impact on financial services, energy and healthcare. Notably stocks in the financial services sector were the biggest winner in the day after Trump’s win, climbing 6%. Again, this looks likely to present both an opportunity and a challenge to companies and their advisers. They will need to balance the desire to take full advantage of new freedoms while adhering to international norms and avoiding the risk of tarnishing their reputations with clients or investors.
Getting the balance right could be especially tricky in environmental regulation and reporting, where Trump and his associates have adopted a critical tone. To take just one example, this calls into question the implementation of new rules to require companies to disclose climate risks from the US Securities and Exchange Commission. These had already been watered down due to political pushback and now look likely to be consigned to the dustbin, according to some commentators. However, many companies may press ahead with such disclosures both to comply with rules in Europe and elsewhere as well as to satisfy shareholders.
Tariffs
Finally, there is the vexed area of trade tariffs, which could send accountants worldwide scrambling. As part of his ‘America first’ platform, Trump has floated a universal tariff of 10%–20% on all imports into the US, with 60%–100% on Chinese imports. But since such figures come from the author of The Art of the Deal, many commentators believe they are merely a starting point for negotiation. After all, S&P Global has estimated that import taxes on such a scale would likely boost inflation by almost two percentage points, a politically fraught outcome that would also take a toll on the stock market.
The vexed area of trade tariffs could send accountants worldwide scrambling
Whatever the final figures, few experts doubt that big changes to tariffs are on the way. This will force companies and their advisers – both in the US and across the world – to adjust their financial models and pricing policies, and potentially even to rejig their supply chains.
The bottom line is that it could take some time for the details of Trump’s policy proposals to be clarified. Regardless of the specifics, the resulting shake-up in rules is likely to be keep companies and their financial advisers busier than usual in coming years.
