The reelection of former President Donald Trump was met with approval from many business leaders and investors, causing the S&P 500 index to rise over 2.5 percent the day after Election Day. Expectations for the Trump administration included lower taxes, reduced regulations, and a reversal of key programs implemented by the Biden administration, such as the transition to renewable energy sources and electric vehicles.
Many CEOs and businesses expressed support for Trump’s victory, as seen in the positive reaction of the stock market. The incoming administration was anticipated to have the most immediate impact on businesses through regulatory policies. The Biden administration had imposed numerous regulations that added significant costs to American businesses, whereas Trump’s administration focused on easing regulations and reducing costs.
Trump’s proposed policies aimed at cutting taxes, regulations, and opening up energy production were seen as beneficial for the economy in the long term. The potential appointment of Elon Musk to lead a new Department of Government Efficiency signaled a commitment to reducing government bureaucracy.
Analysts predicted that the energy industry would be heavily affected by the change in administrations, with Trump likely to remove restrictions on fracking and energy production. Despite efforts by the Biden administration to restrict drilling on federal lands, U.S. oil and gas production continued to increase.
Expanding domestic energy production, particularly in oil and gas, was a key focus of Trump’s economic platform. The easing of regulations on drilling and the encouragement of new natural gas pipelines were expected to increase supply and lower consumer costs. Additionally, coal plants facing closures due to emissions regulations could benefit from a Trump administration.
Overall, the business community and investors welcomed Trump’s reelection, anticipating positive impacts on the economy through lower taxes, reduced regulations, and increased energy production. However, this situation may change.
Brian Savoy, CFO of Duke Energy, an electricity utility that serves the Carolinas, Florida, Indiana, Ohio, and Kentucky, said his company might keep its coal plants running if the Trump administration cuts back EPA emissions regulations that were enacted under the Biden administration.
However, while it is one thing to get oil and gas companies to produce more from existing wells, it is quite another to get them to invest significant capital into exploration and building new wells and refineries. It is not only regulatory uncertainty that is holding them back, it is also the over-investment that led to a glut, which drove prices down a decade ago. By reducing the cost of regulation and providing some assurance that the industry will not be targeted by climate mandates, analysts say the incoming Trump administration might reduce the cost structure enough to entice the industry to begin investing again.
A sign displays prices at a gas station in Chicago on May 21, 2024. The current gas prices range between $3 and $4 per gallon. Scott Olson/Getty Images
âWhat President Trump did in his first term, and what President Biden has been unable to do, is to get the price of oil down and have oil production continue at an increasing pace,â Puzder said. âThatâs when you see an impact on inflation overall; itâs when oil companies can make a profit at a lower price per barrel.â
Many analysts predict that if a second Trump term can bring lower energy prices, this will have a ripple effect throughout the U.S. economy.
Retail gasoline
prices, which were already coming down during the final years of the Obama administration, hit a low of less than $2 per gallon during the first Trump administration and remained under $3 per gallon throughout his term. Gas prices shot up to more than $5 per gallon during the Biden administration before falling back to the current range of between $3 and $4 per gallon.
âAll of these things that have gone up in price significantly are affected by the input costs of energy,â Kish said. âEverything that goes into the price of eggs is affected by the price of energyâitâs heating the hen house, itâs the energy consumed in making food to feed the chickens, itâs the transportation of the eggs, itâs the refrigeration.â
Renewable Energy May Retreat
One segment of the stock market that has not responded well to Trumpâs victory, however, is renewable energy.
The stock price of Sunnova Energy, a solar energy developer,Â
tumbled from $6.90 per share on election day to $3.96 per share the following day, and continued to fall to just over $3 per share at the end of the week. More broadly, the Solar Energy Index CFD, which
tracks the performance of publicly traded companies in the solar energy sector, fell from $42 before the election to $36 by weekâs end.
Anticipated headwinds regarding federal regulations and subsidies that support this industry are the likely cause.
âTrump has pledged to kill the offshore wind industry on his first day in office,â Robert Bryce, energy analyst and author, told The Epoch Times. âThereâs no reason to doubt that he will do just that, which will be good news for whales and ratepayers.â
In addition, âthe Biden administration has opened huge tracts of land in the Western U.S. to development [for wind and solar plants],â Bryce said. âI expect Trump and his appointees will backtrack on that and may even withdraw some of the permits that have already been granted.â
An entrance sign to the Kayenta Solar Plant in Kayenta, Ariz., on June 23, 2024. The Solar Energy Index CFD dropped from $42 before the 2024 presidential election to $36 by the end of the week. Reaching net zero has been a key goal of the BidenâHarris administration, with a commitment made in April 2023 to achieve a carbon pollution-free power sector by 2035 and a net-zero emissions economy by 2050.
The Inflation Reduction Act of 2022 allocated around $400 billion in tax credits, federal loans, and subsidies for the production of green energy in the US, mainly focusing on wind, solar, and nuclear power. However, a 2021 report from the University of Chicago analyzed renewable portfolio standards (RPS) and found that electricity prices increased by 11% seven years after RPS passage.
Similarly, a report from Columbia University’s Climate School in 2021 noted that as the share of renewables in the energy mix grows, electricity bills also rise. The report’s author highlighted the risks of promoting abundant and affordable clean energy without considering the potential cost implications for the public.
Tax policy is another area of focus, with expectations of significant changes under a Trump administration. The fate of the Tax Cuts and Jobs Act (TCJA) of 2017, which cut the corporate tax rate to 21% and is set to expire in 2025, remains uncertain. Extending the TCJA could lead to lower personal income tax rates, reduced standard deductions, and changes to the child tax credit.
Critics fear that maintaining these tax cuts could lead to reduced government revenue and increase the federal deficit, which is projected to reach $1.9 trillion by the end of the year. However, proponents argue that keeping the tax cuts in place could stimulate consumption and investment, potentially resulting in higher tax revenues.
Trump’s tax plan includes imposing tariffs on imports, with rates as high as 60% on Chinese imports. These tariffs could impact a wide range of products, including EVs, wind and solar components, furniture, toys, clothes, and sporting equipment. Import taxes at such levels could significantly increase the average tariff rate on all imports, potentially impacting the retail industry and fueling inflation.
During his term, Trump imposed significant import taxes on various products, many of which were from China. The Biden administration maintained most of these tariffs and added more on Chinese imports. While Trump’s promise to cut taxes on tips and overtime wages for service workers has garnered attention, some experts are skeptical about the overall economic benefits of such initiatives.
In conclusion, the article discusses the potential implications of the Solar Energy Index CFD decline, the BidenâHarris administration’s commitment to achieving net zero, the impact of the Inflation Reduction Act of 2022, tax policy changes under a Trump administration, and the effects of tariffs on imports. Please rewrite the following sentence for me:
“The cat quickly ran across the room.”
Thank you. Please rewrite this sentence.
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