Investing.com — As the U.S. presidential race unfolds and former President Trump moves toward a return to the White House, major policy changes appear likely, impacting industries such as engineering and construction.
Analysts at Barclays (LON:) have identified key areas where changes to trade, immigration and regulatory policies under a Trump administration could reshape these industries, from tariff impacts to financing issues.
Tariffs, a key issue during Trump’s first term, could once again become a central policy tool, creating potential headwinds for the machinery sector.
Companies in this field typically operate with global supply chains and significant international sales activities, including agricultural machinery companies that rely on global markets.
Tariffs on imports, especially from major trading partners, could put pressure on the machinery sector, although industry players are now better equipped to pass on costs compared to 2018.
During the last rate hike, machinery stocks saw a decline due to investor concerns about rising operating costs, but Barclays notes that companies today have refined their pricing strategies to keep cost increases in check.
Companies have learned from COVID-related supply chain disruptions and developed mechanisms such as tariff surcharges to offset cost pressures, which can help them adapt more effectively when tariffs return.
The potential for restrictive immigration policies under a Trump presidency could pose challenges for the construction and manufacturing sectors, where foreign-born workers are critical to the workforce.
According to Barclays, these sectors employ around six million immigrants, many of whom fill roles that are currently difficult to staff with domestic work alone.
Since roughly 30% of U.S. construction workers are immigrants, stricter immigration policies could lead to greater labor shortages, driving up project costs and wage inflation. The southern states, which house a larger share of these workers, are especially vulnerable.
If immigration restrictions escalate, it could affect the availability of labor for projects in these fast-growing regions, potentially reducing project feasibility or increasing costs.
Shifts in regulatory policy are also expected to have mixed impacts. Trump’s previous approach to environmental regulation included substantial rollbacks, and a second term could see a continuation, especially on clean energy.
Trump has been vocal about reducing support for electric vehicles, which could dampen federal support for EV-related projects, a notable area of focus under the Biden administration.
Companies involved in renewable energy projects, such as wind or solar infrastructure, could face a cooling of support, while fossil fuel-based initiatives could face fewer regulatory hurdles.
On the plus side, Trump’s focus on allowing reforms could help machinery companies involved in infrastructure projects.
During his first term, Trump sought to relax permitting procedures, and a second administration could further reduce bureaucratic hurdles, especially around major construction and infrastructure projects.
For companies that rely on the rental of heavy materials and equipment, streamlined permitting could provide more opportunities for new projects and facilitate growth through mergers and acquisitions.
With Republicans poised to control both chambers of Congress, major Biden spending initiatives could come under scrutiny. Initiatives like the Inflation Reduction Act and the CHIPS Act could see slower approval rates, and increased scrutiny could impact how future stimulus dollars are distributed.
Barclays analysts point to the Republican Party’s interest in limiting spending, especially around discretionary projects related to clean energy and technology.
While spending on these initiatives cannot be eliminated without congressional action, project approvals and budget allocations may be subject to delays and increased scrutiny.
This potential shift will likely impact industries that rely on government financing for projects, including certain engineering and construction companies that had been factoring in stimulus-related revenues.
Investors had expected a Trump victory, but appear less prepared for a ‘red wave’ scenario.
The immediate impact on machinery stocks is nuanced: While companies are expected to better cope with trade-related cost pressures this cycle, a Republican Party-led Congress could ease the uncertainties surrounding stimulus-backed megaprojects in areas such as electric vehicle infrastructure and can increase battery production.
Equipment rental companies, often seen as indicators of large project growth, may see slower momentum as these projects stall.
Certain construction companies may face immediate risks from stricter immigration policies affecting labor availability and project turnaround times, while engineering firms that rely on global labor may face fewer constraints.
However, surface transportation funding under the Infrastructure Investment and Jobs Act is largely secured through fiscal year 2026, providing a cushion for companies with strong ties to this sector.
Companies like MasTec (NYSE:), which have a diversified portfolio across traditional energy, communications and energy transmission, may be better positioned to deal with these shifts. Similarly, material companies with less exposure to clean energy are expected to remain more neutral toward any changes resulting from a Trump administration.
Barclays analysts also point to local transportation investments approved by voters in states such as Arizona, Washington and South Carolina that could boost regional demand for construction and machinery.
Local initiatives to renew transportation taxes and preserve carbon credit markets were largely supported, and companies with strong regional ties such as Vulcan Materials (NYSE:), Martin Marietta and Arcosa (NYSE:), take advantage of it.
While federal financing of clean energy could face obstacles, these state-level decisions indicate steady demand for building materials and equipment in specific markets, especially in the western and southern US.
