Trump’s “10 for 1” rule and what it could mean for the economy
In his first term, Trump issued an executive order requiring agencies to identify two existing regulations for repeal when proposing a single new regulation. Trump’s new Executive Order, titled “Unleashing Prosperity Through Deregulation,” ups the ante significantly with a new “10 for 1” rule. It also mandates that the total incremental cost of all new regulations established in fiscal year 2025 must be “significantly less than zero” — again a more stringent requirement than in Trump’s first term, when he mandated the cost “not exceed zero.”
For the record, Trump did manage to keep the incremental cost of new regulations just below zero in 2018. Thus far in his second term, he has revoked 78 Biden-era orders, including regulations related to DEI, climate, immigration, and COVID-19.
So, what might Trump’s approach mean for businesses? I would expect this deregulation drive to reduce administrative costs, increase efficiency, encourage competition, and possibly spur innovation and investment spending. That said, the administration’s overall policy mix will ultimately determine whether the environment is favorable for new and innovative ventures. For instance, current policy uncertainty is so high that investments may be stalled as companies await clarity in the aggregate policy arc.
On its own, deregulation implies stronger growth and lower inflation over time. However, as with all regulatory shifts, the implementation details will determine the true benefits.
Finally, it’s important to note that there will be some redistributive effects of this shift — that is, there will be some economic winners and some losers. For example, I would expect smaller companies, which have less ability to scale the burden of new regulations, to benefit more than large ones. In addition, the Trump administration’s efforts to undo climate-related regulations will level the playing field between fossil fuels and green energy, with a focus on spurring production of the former (possibly at the risk of emissions standards being achieved later than would be ideal for the economy). And in the financial sector, deregulation could be a positive in the credit creation space for banks, where higher capital requirements have shackled their ability to lend to the real economy, leaving private companies to gain share.
With all of these changes, care must be taken to ensure the pendulum does not shift too far the other way and create an environment in which companies or individuals could be harmed by lax supervision or encouragement of excessive risk-taking.
Monthly Market Review — January 2025
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Brett Hinds
Jameson Dunn