Trump’s Second Act: What to Expect in 2025 and Beyond

In an extraordinary political comeback, former President Donald Trump secured a second, non-consecutive term in the White House – a feat only accomplished previously by President Grover Cleveland in 1893. Despite polls indicating an extremely tight contest, Trump won all seven swing states (albeit largely within polling margins of error) while outperforming his 2020 results nationwide to take both the electoral college and the popular vote.

President-elect Trump will return to Washington with a stronger mandate and with Republicans poised to control both houses of Congress – although with the reemergence of split-ticket voting, they are on track to have smaller majorities than Trump’s victory would indicate. The election flipped the Senate to Republican control, with a likely 53-47 composition that mirrors Trump’s initial Senate majority in 2017. In the House of Representatives, Republicans are expected to maintain a narrow majority, pending the results of a few undecided races, including several in California. Republicans may end up with one of the narrowest House majorities ever.

With taxes, deficits, and tariffs likely to dominate the discourse in Washington next year, these slim majorities in Congress could complicate Trump’s efforts to enact his agenda. The Senate provides a healthy cushion to get nominations confirmed, which only require 50 votes. Yet it falls short of the 60-vote, filibuster-proof majority needed to pass many bills. Trump may struggle to push proposed tax cuts through a divided chamber, although modest tax cuts are easier to pass via “budget reconciliation,” which only requires 50 votes in the Senate. The $2 trillion in proposed budget cuts championed by figures like Elon Musk would similarly require bipartisan support that may be hard to achieve.

What could President Trump do on his first day of office?

There is a range of unilateral actions the president could potentially take on day one:

• Roll back President Joe Biden’s executive orders, including in the energy sector (e.g., the liquefied natural gas export ban and prohibitions of drilling on federal lands).
• Announce new executive orders, including on the U.S.–Mexico border. Restricting migration and prioritizing criminal deportations are likely more straightforward than a broader deportation program, which would take time to establish and could require funds from Congress.
• Impose tariffs on China using the existing Section 301 (of the Trade Act of 1974) investigation into China, which Trump used to impose China tariffs in 2018 and President Biden later used to increase those tariffs. Other potential tariffs on products or countries, however, would require an investigation process, which typically takes months.
• Replace directors at federal agencies, should he want to, potentially including:
  • The Consumer Financial Protection Bureau and possibly the Federal Housing Finance Authority, which are structured as single directorships. The Supreme Court has said the president has the authority to fire directors of such agencies.
  • The Federal Trade Commission, where Director Lina Khan’s term expired at the end of September. President Trump could replace her with an existing Republican commissioner.
  • The Office of the Comptroller of the Currency, a key banking regulator.

In all cases, it will take time to nominate and confirm permanent directors, but temporary leaders can be placed in these agencies via different legal methods. While the market response to the election points to greater regulatory clarity, and a likely absence of new regulation, it’s worth noting that deregulation takes time, years in many cases.

What about fiscal initiatives?

For fiscal expansion – taxes and spending – President Trump will still have to go through Congress. This is where the likely narrow majorities could serve as a check.

Assuming Republicans keep the House, a full extension of the expiring Trump tax cuts is likely, but possibly only for a shortened period of time given already high deficits. We could see efforts to reduce spending marginally, but any large cuts will be challenging to get through the House and would be difficult to do via the budget reconciliation process (which only requires 50 votes in the Senate). Everything else likely requires 60 votes.

As we have been saying for months, the deficit was likely to be the biggest loser of the election, with neither candidate inclined to take steps to reduce the deficit and both likely to pass policies that would add to it. The debt ceiling, which will have to be dealt with later in the spring, will likely be lifted easily assuming Republican majorities in both chambers.

What about the Fed?

We don’t expect any changes at the Federal Reserve until 2026. Fed Chair Jerome Powell’s term ends in May 2026, and we believe his position is secure until then. The first Fed governor vacancy is not until January 2026. The president cannot fire a Fed governor without cause.

We believe there’s no question about Fed independence. The Fed is ultimately accountable to Congress – which created the Fed and established its mandate – and to the people. Its independence enables the Fed to enact monetary policy based on data, analysis, and judgment, free of political influence.

Bottom line

President-elect Trump will return to office with a solid mandate and, in many ways, will be less encumbered by the political considerations of having to run for office again (he cannot run for a third term without changing the U.S. Constitution). However, what look to be narrow congressional margins – potentially historically narrow in the House – could be a check on Trump’s agenda, fiscal and otherwise. Regardless, the end of this election cycle brought welcome clarity as the outcome was quickly evident without prolonged uncertainty.