• In any economy, Politics and Policy are two peas of the same pod. The US is at the threshold of a 2nd Trump presidency and with the Republicans having secured a ‘Political Trifecta’ (controlling the Presidency, the Senate & the US Congress) – America’s political landscape has materially altered. For investors, it’s important to decipher what this means for the US government policy, which has huge implications for the broader US economy and for key sectors
• In this report, we analyse how the new administration’s policies may impact the US manufacturing (a bipartisan focus). What’s the outlook for some of the flagship legislations introduced by Biden-Harris administration? Particularly, will the Inflation Reduction Act (IRA) be repealed/capped and how will it impact US manufacturing? We believe that although America’s leadership has changed, its expansive fiscal posture and the overarching ethos of tying national security with economic strategy - will remain in place. Hence, despite the change in leadership, the strategic industrial policy remains intact. Following factors should aid US manufacturing in 2025:

1.) We expect 2025 to be the year of “America First” policies. We also expect Donald Trump 2.0 to pursue his “Make America Great Again” agenda by primarily employing three tools – Tariffs, Tax cuts and Deregulation. Clearly, US manufacturing will benefit from all three, even if the ‘what’ (i.e. which areas are prioritised – green vs non-green initiatives) and the ‘how’ (i.e. how it is implemented, for e.g. subsidies etc.) may differ. Tariffs may hit some supply chains (e.g. goods from Mexico), but if manufacturing of these is eventually reshored to the US, it would aid the creation of even more integrated clusters of local manufacturing

2.) Secondly, the USA’s tech leadership is its key completive advantage: America’s technological advancement has increased its corporate productivity – greater efficiencies; lower costs and higher margins. With several industrials yet to fully leverage AI in industrial design & engineering, US manufacturing is yet to see the full potential of increased productivity and profits

3.) America has the economic wherewithal to reshore manufacturing by investing in digital and physical infrastructure. Combined with policy intent and tech, it makes for a powerful combo

4.) Finally, manufacturing is a rate sensitive sector and benefits from Fed cuts. Lower rates reduce cost of capital, aid borrowing to finance operations and capex. Plus, with the election uncertainty behind us & the policy tailwinds intact, Industrials are likely to invest in capex in 2025

• As such, US industrials capture earnings tailwinds from policy priorities & innovation. Forward thinking industrials are adopting 4th Industrial Revolution technologies to improve operational results. By leveraging AI, 3D printing, and big data analytics, they are driving efficiencies via smart unified processes, enhanced competitiveness & will eventually transform business models at scale