The Trump 2.0 administration is entering its third week since Inauguration Day on January 20th. The changes that are being made are swift, profound and in some cases will have major impacts on the US economy. Here are a few of the recent actions that you should be watching and how they may affect your financial future.

Trade wars and their impact on US economy

A trade war has started, and the Trump administration has fired the first shot. As of Feb 2nd, 2024, new tariffs have been placed on Mexico and Canada of 25% on all goods and 10% on energy products. An instantaneous result of these tariffs is the weakening of the Mexican Peso and Canadian Dollar, and a stronger US Dollar. The Trump administration is citing both countries are not willing to assist in battling illegal immigration and fentanyl smuggling into the United States as the main reason for implementing such tariffs. Such tariffs could drive both Mexico and Canada into a recession, given that the US is their first and second, respectively largest trading partners worldwide. These tariff wars are expected to exacerbate the cost of goods and continue to put pressure on inflation, which is already making a comeback, according to a US News recent report.

Reduction in government’s footprint and budget

DOGE, the Department of Government Efficiency spearheaded by Elon Musk is starting to reduce the size of the government by recently announcing it has cancelled $420 million in contracts in 80 hours. This puts DOGE on track to cut $67 billion per year. Most of these contracts were focused on DEI programs and empty buildings leased through the GSA or General Services Administration. The GSA manages a massive real estate portfolio of 370 million square feet. The Trump administration is planning to sell off two thirds of the government buildings to the private sector which could have a major impact on pricing in the respective markets. Additionally, about three-quarters of the 70 million square feet of office space the GSA leases from private landlords in Washington D.C. is also likely to be canceled, according to Don Peebles, a longtime Washington, D.C.-based developer.

While Recentric’s portfolio includes a GSA tenant, the Army Corp of Engineers, we believe this specialized Risk Mitigation office which handles the Western Region of the United States is not a target for cancelled leases. In fact, since the Trump administration has announced a renewed initiative to drill for oil and gas domestically, the Army Corp of Engineers is required to approve all new drilling sites that affect federally regulated waters and wetlands in the United States, which we believe will make this department even more relevant.

Health Care and the US government

Health care is the largest sector of the US economy ($4.5 trillion in 2022) and of that, the US government makes up 18% of the entire US health care industry. The Trump administration has implemented a spending pause which has been directed largely at the enormous government bureaucracy, however, has inadvertently affected Medicaid payments to states and impacted special funding for safety net hospitals such as Denver Health. The Center for Disease Control and Prevention and the NIH (National Institute for Health) is being targeted by requiring all external communications to be halted. If you have exposure to real estate or equities that center around any of these targeted agencies, you may want to take note.

United States’ fiscal policy is seeing seismic shifts happening at breakneck speed. You can be sure that many of President Trump’s executive actions will be challenged in court, especially when it comes to de-funding programs that have already been approved by Congress. Taking a deep dive into each action can help you to determine what the financial impact will be on your investments and how to prepare for a new administration that has government spending in its crosshairs.