With the 2024 presidential election looming, there’s an economic question everyone needs an answer to: Can a deregulatory policy agenda under a potential second Trump administration boost economic activity?
With both candidates facing constraints on further fiscal expansion, former President Trump has advocated deregulation to boost domestic growth.
On the other hand, President Biden’s policies to promote the environment and workers’ rights have placed a heavy burden on large corporations.
It’s fair to say that Trump’s first term focused on reducing regulatory complexity to simplify doing business. Although proxies such as executive agency budgets and the restrictive language in the Code of Federal Regulations did not change substantially, major deregulatory actions during his previous term targeted environmental and energy regulations, financial regulations, and net neutrality.
On the contrary, the Trump administration has increased some restrictions, such as those on the prices of medications and nicotine products.
A second Trump term would likely prioritize easing regulatory hurdles to oil and gas development, expanding LNG exports and reversing restrictions on greenhouse gas emissions. The regulatory environment for healthcare may see fewer changes given Trump’s past attempts to regulate drug prices.
Analysts predicted that financial regulations could change under a Trump presidency, with consumer finance regulations possibly changing faster than capital and liquidity requirements. In all likelihood, antitrust enforcement could loosen somewhat, although big cases in the tech sector are likely to continue, they noted.
Sectors that could benefit from deregulation are already seeing relative strength in the stock market after the presidential debate. Companies within heavily regulated sectors such as gaming and capital markets performed better, indicating market optimism about a deregulatory agenda.
While academic studies suggest that reduced regulation could boost activity, analysts say the impact of Trump’s first-term deregulation was limited at the macroeconomic level.
Thus, while a deregulation agenda may benefit specific sectors, its overall impact on economic growth remains uncertain.
