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Policy shifts ahead following election of Trump, GOP Congress

Ty Rohloff

Ty Rohloff is vice president, food and agribusiness, for Compeer Financial. He has nearly 20 years of experience in the food and agribusiness industry and is a guest columnist for this week’s issue of Cheese Market News®.

This may be one of the easiest articles I’ve had the opportunity to write over the years. There are many current events that impact our everyday lives and businesses. The United States just held an election that resulted in a dramatic change in leadership for the country. This shift could have numerous impacts, both domestically and internationally. Some see the outcome as positive, while others view it as a step backward.

• Election results

Let’s start with the election results. As of this writing, President-elect Donald Trump was elected for another term, defeating Vice President Kamala Harris by almost 3 million votes in the popular election and securing 312 of the possible 435 electoral votes. This result was a departure from where most pollsters predicted the election would land, as pre-election projections showed a dead heat.

For many, the biggest relief may be the end of the relentless political ads that flooded nearly every media platform. This presidential race was one of the most expensive in history. Harris’s campaign amassed over $1.6 billion, while Trump’s campaign spent over $1 billion. The majority of Harris’s funding came from candidate committee money, while Trump’s campaign relied heavily on outside funding.

Speculation abounds about why Harris lost. Could it have been dissatisfaction with the past four years, a perceived lack of enthusiasm for her vision for the next term or a general vote against her candidacy?

Perhaps it was a shift in belief that Trump is the best person to lead the country. All these factors likely played a role.

Republicans have more to celebrate, as they retained control of the House and gained control of the Senate. With Republicans securing at least 218 seats, a majority is confirmed, though some districts are still counting.

In the Senate, Republicans now hold 53 seats, a gain of four seats from the last election.

A Republican majority across the board means fewer obstacles to passing initiatives — at least for the next two years.

• Initiatives and impacts

President-elect Trump has been busy assembling his Cabinet and other high-level appointments. While he has proposed several initiatives, the individuals around him will likely shape much of his administration’s impact.

One intriguing appointment is Elon Musk, along with former presidential candidate Vivek Ramaswamy, to the newly formed Department of Government Efficiency. Musk, a visible Trump supporter, has pledged to cut $2 trillion from the federal budget. While this makes for compelling headlines, it may prove challenging given the complexities of federal spending and the 450 departments that comprise the government.

Federal spending and the deficit along with total debt have been a few of the less mentioned topics. There are a lot of ways to interpret U.S. debt. There are two statistics that stand out. The U.S. dollar’s share of global reserves has fallen from 70% in 1999 to 58% in 2024. In that same period, U.S. debt as a percent of gross domestic product (GDP) has skyrocketed from 38% to nearly 100%. In addition, total debt has increased almost 50% from $23.2 trillion in early 2023 to $35.5 trillion as of Sept. 30, 2024. In 2023, Fitch (the ratings agency) downgraded the Unites States’ long-term rating to AA+ over AAA, related in part to the general government debt burden. Another factor is the proposed tax cut discussions, both an extension of those set to expire in 2025, and possibly additional cuts. Trump’s combination of tax cuts, tariff increases, military expansion and deportation efforts could widen budget deficits by an estimated $7.5 trillion over the next decade, according to the Committee for a Responsible Federal Budget. There is an interest component as well, with higher rates. That is what led to higher costs on an increasing amount of debt. Balanced budgets are important. Without a balanced budget, it is hard to keep almost any business afloat. While acknowledging what the national debt is, it is more important to factor in what the cost might be. The U.S. has benefited as being a safe haven, and Treasuries have been a top place to harbor dollars from across the globe. Per the U.S. Treasury, the average interest rate for all federal government-issued interest-bearing debt has jumped in recent years, to 3.28% as of June 30, 2024.

The average interest rate paid today on U.S. government debt is more than double what it was in 2020. In 2023, interest costs totaled $658 billion — surpassing most other components of the federal budget. In 2024, that cost is expected to total $892 billion. Over the next decade, the U.S. government’s interest payments are projected to total $12.9 trillion — the highest dollar amount for interest in any historical 10-year period and more than double the total spent in the past two decades. In addition, relative to the size of the economy, interest costs would reach 3.4% of GDP in 2025 — eclipsing the previous high set in 1991. Interest costs would climb to 4.1% of GDP by 2034.

• Trade impacts

The content provided gives a sense of the current state and impacts of future policy change. President-elect Trump has not been shy around his thoughts on trade disadvantages. Trump has proposed heavy tariffs on imports. If you’re a company exporting to the U.S., consider this: a blanket 10%-20% tariff on all imported goods by the U.S., a 60% or higher tariff on goods from China and up to 100% on goods from Mexico. While not dairy related, there is an expected impact on grains. Soybeans and soy products could see export tariffs of 30%-35%, up from 3%-9% now. Corn exports could see a 1% tariff rise to 26%. South America continues to be a secondary source for grains and continues to take market share. Mexico, the U.S.’s largest trade partner, accounted for $2.32 billion in dairy goods exported in 2023. Canada was the second-largest partner, with $1.09 billion in exports, followed by China at $607 million.

Given that dairy exports equal roughly one-seventh of daily production, access to stable markets is critical. Tariffs could disrupt these relationships, posing challenges for the dairy industry and other agricultural sectors.

• Farm bill and those representing

Finally, the farm bill. The most recent bill expired on Sept. 30, 2023, and was extended until Sept. 30, 2024. While extensions provide temporary stability, no resolution has been reached for a new 5-year bill.

The 2024 election marks a pivotal moment in American leadership, setting the stage for significant policy shifts domestically and internationally. With a Republican majority across the board, the potential for streamlined legislative action is high, though challenges such as mounting national debt, trade tensions and the pending farm bill loom large. As the nation looks ahead, the balance between ambition and pragmatism will be critical in shaping a sustainable and prosperous future for all Americans.

CMN

The views expressed by CMN’s guest columnists are their own opinions and do not necessarily reflect those of Cheese Market News®.

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