President Trump's Fiscal Agenda: Navigating Tax Cuts, Trade Wars, and Sector Shifts

The interplay of tax reforms, trade policies, and market dynamics under President Trump's fiscal agenda is reshaping corporate profitability and investor priorities. As the Tax Cuts and Jobs Act (TCJA) expiration deadlines loom and trade tensions simmer, sectors are diverging sharply in their vulnerability and opportunity. Investors must pivot toward companies with pricing power, domestic supply chains, and fiscal resilience while hedging against looming risks.

Tax Cuts: Winners and Losers in Corporate America

The TCJA's 2017 tax cuts, now partially extended through the House-passed One Big Beautiful Bill Act, have amplified sector divides. Domestic manufacturers and energy firms are prime beneficiaries of lower corporate rates (37% vs. 39.6% post-2025) and expanded deductions. For instance, steel producers like United States Steel (X) and Caterpillar (CAT) gain from both reduced taxes and tariffs on imported steel, which shield them from foreign competition.

Meanwhile, industries reliant on global supply chains—such as consumer electronics, automotive parts, and apparel—are squeezed by higher input costs due to tariffs on Chinese imports.

Trade Wars: A Double-Edged Sword for Industry

While tariffs on steel, aluminum, and Chinese goods protect domestic producers, retaliatory measures have hurt U.S. exporters. Agriculture (e.g., Deere & Co. (DE)) faces reduced Chinese demand, while semiconductors (e.g., NVIDIA (NVDA)) grapple with supply chain disruptions. Conversely, energy firms benefit from reduced regulatory burdens and tax incentives for shale production.

The House bill's failure to address expiring bonus depreciation for capital investments could disadvantage manufacturers requiring heavy equipment upgrades. Investors should favor firms with cash reserves and pricing power, such as ExxonMobil (XOM) or Chevron (CVX), which can absorb costs while maintaining margins.

Risks: Deficits and Volatility Ahead

The TCJA's $2.3 trillion deficit boost and the One Big Beautiful Bill Act's $3.8 trillion cost over ten years amplify fiscal risks. Rising interest rates and geopolitical instability—fueled by trade wars—could trigger market turbulence by mid-2026. Sectors with global exposure, like consumer discretionary (e.g., Amazon (AMZN)) or pharmaceuticals (e.g., Pfizer (PFE)), face heightened volatility.

Portfolio Strategy: Position for Sector Shifts and Expirations

1. Overweight Domestic Manufacturers and Energy:
2. Steel & Heavy Equipment: Caterpillar (CAT), Deere (DE)

3. Energy: Exxon (XOM), Occidental Petroleum (OXY) (benefiting from TCJA's pass-through deductions and relaxed regulations).

4. Underweight Global Supply Chain Reliant Sectors:

5. Tech Hardware: Avoid firms dependent on Asian manufacturing (e.g., Advanced Micro Devices (AMD)).

6. Consumer Staples: Reduce exposure to companies with inflated input costs (e.g., Procter & Gamble (PG)).

7. Focus on Cash Flow and Pricing Power:

8. Utilities: NextEra Energy (NEE) (stable demand and regulated pricing).

9. Healthcare: Johnson & Johnson (JNJ) (diversified revenue streams).

10. Hedge Against Volatility:

11. Allocate 10-15% to gold miners (e.g., Newmont Mining (NEM)) or Treasuries as a buffer against geopolitical shocks.

Conclusion: Act Before the TCJA Clock Runs Out

The TCJA's expiration in 2025—and the unresolved fate of provisions like bonus depreciation—adds urgency to portfolio rebalancing. Investors should prioritize sectors insulated from trade wars and fiscal cliffs while preparing for potential market volatility. The path forward favors cash-rich, domestically focused firms and demands a disciplined, sector-aware approach to navigate Trump's fiscal legacy.

Investment Advice:
- Buy: Caterpillar (CAT), Exxon (XOM), NextEra (NEE)
- Avoid: Amazon (AMZN), AMD (AMD), Pfizer (PFE)
- Hedge: 10% in gold equities or short-term Treasuries.

Act swiftly—time is running out to position before the TCJA's end and the next wave of fiscal and trade uncertainty.