Policy Risk Monitor - January 23, 2025
A weekly news scan of key policy areas to help firms identify and monitor policy risks.
Economic Policy
Trump Issues Executive Orders on Key Business Policies
On January 20, 2025, President Donald Trump issued a series of executive orders and memorandums that begin implementation of his policy agenda. While Trump’s executive orders addressed a range of issues, notably immigration, his orders and memorandums on trade, tax, climate, and energy outline his overall economic policy. Trump Executive Orders: Key Policy Areas for Business
Trump Declares Regulatory Freeze
On January 20, 2025, President Trump issued a memorandum, “Regulatory Freeze Pending Review,” which directed “all executive departments and agencies” to “not propose or issue any rule in any manner” until a “department or agency head appointed or designated by the President” reviews and approves the rule. The memorandum also immediately withdraws any rules sent to the Office of the Federal Register but not published in the Federal Register.
Tax
Trump Withdraws U.S. from the OECD’s Global Tax Deal
Trump’s memorandum on the OECD’s Global Tax Deal states that the 2021 agreement for a global minimum corporate tax "has no force or effect in the United States.” The document also directs the Secretary of the Treasury to “investigate whether any foreign countries are not in compliance with any tax treaty with the United States or have any tax rules in place, or are likely to put tax rules in place, that are extraterritorial or disproportionately affect American companies.” It also directs the secretary to develop a “list of options for protective measures or other actions” to take in response to non-compliance. The Global Tax Deal, known officially as the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), aimed at reforming the international tax system with a “two-pillar” approach of: (1) reallocating taxing rights of multinational corporations to where the products or services are consumed; and (2) imposing a 15% minimum tax on global corporations.
Senate Republicans Oppose House Republican Proposed Corporate Tax Increase
Senate Republicans expressed opposition to House Republican proposals to raise corporate tax rates by a few percentage points to offset the cost of President-elect Trump’s tax package and ensure that the planned budget reconciliation package doesn’t add to the deficit. Senate Republicans argue that increasing corporate taxes could reduce U.S. competitiveness.
Progress in Talks to Raise SALT Cap
New York Republicans are discussing how to raise the $10,000 limit on deductions of state and local taxes (SALT). Trump and congressional leaders agreed to include the measure in a tax bill this year.
Trade
Trump Issues Memorandum on Trade Policy
Trump issued a memorandum on his “America First Trade Policy.” The order states that he is “establishing a robust and reinvigorated trade policy that promotes investment and productivity, enhances our Nation’s industrial and technological advantages, defends our economic and national security, and — above all — benefits American workers, manufacturers, farmers, ranchers, entrepreneurs, and businesses.” (see Trump Outlines “America First Trade Policy.”)
Trump Considering 25% Tariffs on Mexico and Canada by February 1
President Trump said his administration is considering 25% tariffs on Canada and Mexico by February 1 unless those countries take stronger measures to stop the flow of unauthorized migrants and fentanyl into the United States. Trump said his proposed tariffs of 10% to 20% on all U.S. imports remain a possibility but "we're not ready for that yet." Canadian Prime Minister Justin Trudeau said Canada could retaliate against U.S. tariffs with a dollar-for-dollar match on tariffs. Mexican President Claudia Sheinbaum did not issue tariff threats but said she will respond “step by step.”
Trump Reportedly Wants Early Renegotiation of USMCA
Trump is threatening tariffs on Canada and Mexico to pressure them into renegotiating the U.S.-Mexico-Canada (USMCA) trade agreement before its scheduled 2026 review. He wants to change the automotive rules to force auto plants to move from Canada and Mexico back to the United States. During the campaign, Trump discussed renegotiating the USMCA to make it more favorable to the auto industry. Currently, 75% of a vehicle’s parts must be made in a USMCA country to be tariff-free, up from 62.5% under NAFTA.
Trump Does Not Commit to Date for Tariffs on China
Trump decided to not immediately impose tariffs on China, but instead indicated his intention to negotiate with Chinese President Xi Jinping. He declined to say what date he would impose additional tariffs on China and said he would have “meetings and calls” with Xi Jinping. Trump has criticized China’s trade practices, its export of fentanyl precursor chemicals, and its influence on the Panama Canal. “We’re talking about a tariff of 10% on China, based on the fact that they’re sending fentanyl to Mexico and Canada,” he said. Trump had stated during the campaign that he would impose tariffs of 60% on Chinese products.
European Automakers Call for “Grand Bargain” with U.S. to Avoid Trade War
The European auto industry body urged EU leaders to not retaliate against Trump’s threatened tariffs but instead to “seek a grand bargain with the US and attempt to avoid a potential trade conflict.” Trump has stated that he would impose a blanket tariff of up to 20% on all U.S. imports, which would impact the EU car industry.
Mexico Offers New Investment Incentives, Including for EVs
Mexico will allow deductions of up to 91% for investments in fixed assets, with larger benefits offered through 2026. The incentives, as part of “Plan Mexico,” are intended to entice companies to relocate their manufacturing operations to Mexico to be closer to the U.S. market. Electric cars are among the items eligible for the incentive.
EU to Subsidize Electric Vehicle Sales to Counter China
The EU has pledged to use subsidies to boost demand for electric vehicles, the Financial Times reported. The pan-EU subsidies or other incentives would be implemented to counter Chinese EV sales in the EU.
EU and Mexico Agree on Trade Deal that Includes EV Protections
The EU and Mexico agreed to modernize their existing agreement after nine years of negotiations in an effort to reduce their reliance on the United States. Mexico will be allowed to export electric vehicles tariff free to the EU if the vehicles contain at least 60% Mexican or EU-made components by value. This component requirement will make it harder for China to use Mexico as a manufacturing base for electric vehicles to be exported to the EU. Vehicles that use Chinese batteries will be subject to the standard 10% tariff.
The agreement also aims to increase EU exports to Mexico in financial services and telecommunications, secure the supply chain for critical raw materials, and allow access to government contracts on an equal footing to domestic firms. Mexico will also remove tariffs of up to 100% on EU exports including cheese, poultry, pork, pasta, jams and marmalades, chocolate, and wine. In exchange, Mexican producers will not be able to use the protected names of more than 500 products including champagne, Parma ham, and Rioja wine. The EU will also increase low tariff quotas for Mexican exports such as beef, poultry and ethanol.
Climate
Trump Withdraws U.S. from International Climate Agreements
Trump’s executive order on “Putting America First In International Environmental Agreements” withdraws the United States from the 2016 Paris Agreement, which aims to reduce global carbon emissions. The order also withdraws the United States from “any agreement, pact, accord, or similar commitment made under the United Nations Framework Convention on Climate Change.” Lastly, it stops and revokes any “purported financial commitment made by the United States under the United Nations Framework Convention on Climate Change” and immediately rescinds and revokes the “U.S. International Climate Finance Plan.”
Energy
Trump Issues Series of Executive Orders on Energy
Trump initiated a broad revision of U.S. energy policy through a series of executive orders that focus on increasing oil and gas production.
Trump’s executive order on “Unleashing American Energy” establishes U.S. policy to “encourage energy production and exploration on federal lands and waters, including on the Outer Continental Shelf.” In other key areas of the order, it eliminates the “electric vehicle (EV) mandate” and terminates “state emissions waivers that function to limit sales of gasoline-powered automobiles.”
Trump issued an executive order on “Declaring a National Energy Emergency,” which directs agency actions in six main provisions, including the use statutory emergency powers to facilitate approval of energy resources and to expedite the completion of energy infrastructure projects.
Trump issued an executive order titled “Unleashing Alaska’s Extraordinary Resource Potential,” which establishes U.S. policy to “avail itself of Alaska’s vast lands and resources,” including the Arctic National Wildlife Refuge (ANWR).
Trump issued a memorandum that temporarily withdraws the Federal Outer Continental Shelf from offshore wind leasing and calls for a review of the Federal government’s leasing and permitting practices of wind energy projects.
See Trump Executive Orders: Key Policy Areas for Business
Foreign Investment
Trump Pauses Enforcement of Tik Tok Ban
President Donald Trump signed an executive order for a 75-day delay in the enforcement of the law banning TikTok from the United States. Trump said the U.S. government should own half of TikTok's U.S. business in return for keeping the app alive and sad he could impose tariffs on China if it failed to approve a U.S. deal with TikTok.
The U.S. Supreme Court recently upheld a law banning Tik Tok if its Chinese parent company, ByteDance, does not sell the social media app. In April, President Joe Biden signed into law a bipartisan measure requiring ByteDance to sell the app to a U.S. buyer or be banned from the United States. Tik Tok briefly went offline before Trump stated that he would pause the ban.
Geoeconomics
Trump Calls for Investment in United States during Davos Address
President Donald Trump addressed the World Economic Forum in Davos, Switzerland through a virtual appearance. Trump criticized European regulators for their treatment of U.S. tech companies, said he would ask Saudi Arabia and the Organization of the Petroleum Exporting Countries (OPEC) to lower oil prices, and criticized large banks for not providing service to conservatives. He also called for investment in the United States. “My message to every business in the world is very simple: come make your product in America and we will give you among the lowest taxes of any nation on Earth,” he said. “But if you don’t make your product in America, which is your prerogative, then very simply you will have to pay a tariff.”
European Commission President Warns of “Fracturing” Global Economy
European Commission president Ursula von der Leyen warned that the world economy has “started fracturing along new lines” after Trump threatened tariffs on the EU, the Financial Times reported. Von der Leyen, while speaking at the World Economic Forum in Davos, said it was in “no one’s interest to break the bonds in the global economy” and cautioned against a “race to the bottom” on global trade.
IMF Warns of Revived Inflation from Trump Policies
The IMF’s chief economist warned that higher tariffs, lower taxes, and reduced immigration would risk reviving inflation and preventing the Federal Reserve from cutting interest rates. The IMF stated that the “policy shifts under the incoming US administration…are likely to push inflation higher in the near term relative to our baseline. Some indicated policies, such as looser fiscal policy or deregulation efforts, would stimulate aggregate demand and increase inflation in the near term, as spending and investment increase immediately. Other policies, such as higher tariffs or immigration curbs, will play out like negative supply shocks, reducing output and adding to price pressures.”