Industry’s Outlook on Washington
January 24, 2025Comments
In the December 2024 PMA Business Conditions Report, PMA President David Klotz said, “Metal formers continue to demonstrate resilience despite economic uncertainty, driven in part by the delay in reinstating key tax provisions.” This statement could not ring truer, especially as it relates to how the policies coming from Washington, D.C., contribute to the industry’s outlook for 2025.
President Trump and the newly sworn in 119th U.S. Congress immediately face a deadline of their own making—January 1, 2026, when more than $4 trillion in tax increases begin taking effect. This is the “economic uncertainty” to which Klotz refers, and the impact is widespread, affecting defense spending, electric-vehicle transition, infrastructure investments and supply-chain health.
While we cannot predict the results of all actions stemming from Washington, manufacturers should factor in several scenarios. Much depends on whether Republicans in Congress can pass a government-spending bill and farm legislation; address the expiring tax cuts; repeal the Biden administration’s climate-focused Inflation Reduction Act; address the border and immigration; and expand oil and gas exploration.
In the case of defense and national security, while the Biden administration provided $2.5 billion in additional security assistance to Ukraine in its final days, Congress failed to pass emergency spending to replenish the U.S. military, nor the FY 2025 budget. As the Trump administration seeks to quickly move on its agenda, it must overcome the failure of the previous Congress to complete government-spending legislation.
Before leaving in 2024, Congress maintained the topline defense-spending level at $895.2 billion, leaving out $21 billion in emergency defense spending sought by the Senate. Current government spending expires March 14. For manufacturers in the defense industrial base, the delay in funding means a possible slowdown in new orders and customers seeking longer payment terms.
Also, within the first 100 days of the second Trump presidency, Republicans on Capitol Hill plan to move legislation, under a restricted process called reconciliation, to provide funding for immigration controls and the border. House GOP leadership likely can afford only a single defector, as Democrats are expected to oppose the partisan process for moving an immigration bill.
This exercise, possibly paired with oil and gas exploration, will consume a significant amount of political capital for Republicans in Congress and for President Trump, without the certainty of passage. Ahead of the new year, President Trump (and Elon Musk) endorsed H-1B visas, raising the risk of lawmakers fighting amongst themselves for the first 100 days. And, despite the hopes of downstream suppliers to oil and gas customers, industry sources in Washington indicate that the promises of the Trump campaign may not materialize quickly, especially if tied to a stalled immigration effort.