Trump-Era Policies and the 2025 Market: Tax Cuts, Deregulation, and the Rise of Pro-Growth Assets

The economic landscape of 2025 is being reshaped by the enduring legacy of Trump-era policies, particularly tax cuts and deregulation, which continue to influence pro-growth asset classes such as artificial intelligence (AI), energy, and manufacturing. As the U.S. navigates the expiration and extension of key provisions from the 2017 Tax Cuts and Jobs Act (TCJA), the interplay between fiscal policy and technological innovation is creating both opportunities and challenges for investors. Larry Kudlow has argued that these policies are not only counter-inflationary but also pivotal in driving productivity and GDP growth, potentially reaching 4% with low inflation. Yet, the broader implications of these policies-particularly their uneven distribution of benefits and environmental trade-offs-demand a nuanced analysis.

Tax Cuts and Deregulation: A Double-Edged Sword

The TCJA, a $1.5 trillion deficit-financed reform, initially spurred economic growth, pushing GDP from 2.4% in 2017 to 2.9% in 2018. However, its long-term effects remain contentious. While the Congressional Budget Office (CBO) projected modest growth, the uneven distribution of tax cuts-favoring high-income households and corporations-has raised concerns about inequality and fiscal sustainability. For instance, in 2018, the top 0.1% of earners saw average tax cuts of $193,380, compared to $930 for middle-income households.

In 2025, the expiration of TCJA provisions was a looming threat, with the CBO estimating a $4.6 trillion revenue increase from FY2025 to 2034 if they lapsed. However, the "One Big Beautiful Bill Act," signed in July 2025, permanently extended most TCJA provisions, including reduced corporate tax rates and pass-through deductions. This legislative maneuver has bolstered corporate profits, particularly for S&P 500 firms, though its impact on overall economic growth remains limited.

Pro-Growth Assets: AI, Energy, and Manufacturing

The Trump administration's focus on deregulation and energy production has positioned AI and quantum computing as central to U.S. technological leadership. Federal R&D priorities now emphasize foundational research and applied engineering, with the White House linking these technologies to innovations in semiconductors, secure networks, and advanced manufacturing. Larry Kudlow has highlighted a "CapEx boom" in AI and quantum computing, driven by tax incentives and regulatory clarity.

Yet, the energy demands of AI infrastructure are staggering. U.S. data centers consumed 183 terawatt-hours of electricity in 2024-4% of the nation's total usage-and this is projected to rise by 133% to 426 TWh by 2030. The energy-water-minerals nexus is a growing concern, with AI data centers consuming 450 million gallons of water daily by 2030 and relying on critical minerals like lithium and cobalt, often sourced from geopolitically sensitive regions.

The administration's energy policies, however, are contradictory. While AI infrastructure is fast-tracked as a national security priority, subsidies for solar and wind power are being rolled back. This creates a tension between the need for rapid energy expansion and the administration's focus on traditional energy sources like natural gas and nuclear power, which face long lead times and high costs.

Manufacturing, another key sector, has seen mixed results. The Trump administration's tariffs, now averaging 10-20%, have boosted corporate earnings but exacerbated supply chain uncertainty. Despite pro-manufacturing incentives like 100% depreciation on capital equipment, the U.S. trade deficit grew by 14% in Q3 2025, and 49,000 manufacturing jobs were lost. J.P. Morgan analysts note that while AI and automation could address labor shortages, the sector remains in contraction.

Market Implications and Investor Considerations

The stock market has reflected these dynamics, with the S&P 500 experiencing volatility in 2025. A -12.1% intra-month decline in April 2025 underscored investor uncertainty, though gold prices surged as a safe-haven asset. For pro-growth assets, the outlook is bifurcated: U.S. private AI funding reached $109.1 billion in 2024, while manufacturing faces headwinds from tariffs and labor challenges.

Experts caution that the long-term viability of these sectors depends on balancing innovation with sustainability. For AI, this means adopting energy-efficient data centers and renewable energy sources. For manufacturing, it requires strategic use of automation and AI to optimize supply chains.

Conclusion

Trump-era policies in 2025 have created a complex economic environment, where tax cuts and deregulation are driving growth in pro-growth assets but also exacerbating inequality and environmental risks. While Larry Kudlow and others celebrate the "Trump boom," investors must navigate the trade-offs between short-term gains and long-term sustainability. The coming years will test whether the U.S. can harmonize its ambitions for technological leadership with the realities of energy constraints and global competition.