Trump's first day

Normally I wouldn’t have even considered writing a Hot Take for a leadership change in another country, but the US – and its new President – are a special kind of beast. There’s just so much power vested in the executive branch of the US government these days, and significant uncertainty as to how that power will be wielded, that it can easily move global markets and economies in major ways.

Donald Trump as President is basically peak uncertainty. I mean, this is a guy who just days out from being inaugurated launched a meme “Trump coin” designed to rip off his own supporters:

So buckle up, because it’s gonna be a wild four years!

Trump’s executive orders

Donald Trump has only been in office for around 10 hours. But he has already signed “close to 100” executive orders, with plans to scale that up to 200 in his first week. That would almost match the entirety of his first term, during which he signed 220 orders (although Biden revoked 72 of them):

There are far too many to cover and many will be challenged in court, such as his order to end birthright citizenship for children of noncitizens. So I’m going to focus solely on the orders that look to be the most economically impactful, with a specific focus on those that could affect Australia.

“We will drill, baby, drill”

The most important day 1 decision was Trump’s declaration of a national energy emergency:

“‘The United States will not sabotage our own industries while China pollutes with impunity’, Trump said during a ceremony at Capitol One Arena, where he signed multiple orders in front of roaring supporters. The actions included revoking 78 Biden-era actions.

By calling a national emergency on energy, Trump is making it the priority of his administration to increase the domestic production of oil and other forms of fossil-fuel energy, White House officials said. It comes as U.S. crude oil production has already hit an all-time high over the past year.”

Energy might be where Trump and the US have the biggest influence on the global economy. Yes, even more than his famous tariffs! That’s because where the US goes on energy, the rest of the world will be pressured to follow.

To go with his energy emergency, Trump signed an order withdrawing from the Paris climate treaty (he did the same during his first term but due to now-irrelevant quirks in the agreement, it didn’t come into effect until the day he left office). Given that China also effectively withdrew in 2023 when Xi Jinping said it would “decide on its own path to reduce carbon emissions”, the agreement now lacks the two countries with the first and second largest CO2 emissions.

That has implications for every other country, including Australia. It basically gives politicians an excuse not to do what they promised and to miss their targets, even if they officially remain party to the agreement. Given that pushing for net zero within the Paris 2030 timeline inevitably comes at an economic cost, and plenty of countries are struggling with their own perpetual budget deficits and cost of living crises, I fully expect the global energy transition to slow.

It’s also bad news for the Albanese government, which is fully committed to the Biden administration’s green policy agenda. The Paris agreement, vehicle emission standards, green industrial policy – all of those have been mimicked down under in some form or other by Albanese and his energy minister, Chris Bowen.

Trump has now ditched all of them, as I suggested might happen a year ago:

“The ink had barely dried on Energy Minister Chris Bowen’s new vehicle emission standard requirements before it was revealed that US President Joe Biden is about to relax his own country’s new emission standards requirements – on which Bowen’s are based. And a future President might remove them altogether, as Trump did last time he was in office.”

Trump also signed orders ending the Biden administration’s pause on approving new facilities that export LNG, and banned leasing for new offshore wind projects in federal waters. Offshore wind projects, which have been struggling due to the need for large subsidies and local pushback – including in Australia – are certainly doomed.

All of these decisions fully reflect the views of Trump and his new Energy Secretary, former fracking executive Chris Wright. Wright is a realist who appears willing to acknowledge trade-offs – that climate change is a concern but not an emergency, and that we probably shouldn’t impoverish ourselves so that the Earth will be a little cooler in 100 years, a time when our descendants will be significantly richer and more capable of dealing with it.

Alex Trembath provided a good summary of what Wright might bring to the table:

“While Wright has fairly been called a renewable sceptic and ‘an evangelist for the oil and gas industry’, he has also spoken positively about solar, nuclear power, next-generation geothermal, and the potential of energy storage to ‘open the door (again) for valuable contributions growing wind and solar penetration’. He is, in other words, more or less a classic all-of-the-above energy executive, something that would not be out of place in a federal agency with offices of Nuclear Energy, Renewable Energy and Energy Efficiency, and Fossil Energy and Carbon Management.

‘I’ve worked on that most of my career, in nuclear, solar, geothermal’, he told the Senate this week. ‘Do I wish we could make faster progress? Absolutely’.”

The big test for the Albanese government is whether it has the political wherewithal to pivot away from its renewables at all costs mindset and adopt an all-of-the-above energy plan ahead of a possible second term, a policy that is likely to be more popular with voters that have become increasingly concerned about rising power costs.

No tariffs, yet

Missing from Trump’s day one executive orders were any new tariffs. But what he did do was threaten his country’s two largest trading partners, Canada and Mexico:

“We are thinking in terms of 25% on Mexico and Canada because they’re allowing vast numbers of people…to come in, and fentanyl to come in’, Trump said when asked while signing executive orders about his thought process on tariffs toward the two countries.

‘I think we’ll do it Feb. 1’, he added when asked about a timeline.”

Tariffs are going to be a permanent part of Trump 2.0, just as they were the last time around. They will be economically damaging, but raising the prices of certain imports by 25% won’t cause the US economy to implode, especially as the dollar will appreciate to offset some of the effect. The real question will be whether the harms Trump inflicts with his tariffs will be offset by the benefits he’ll bring with things like his energy emergency.

However, unlike the last time around Trump’s Treasury Secretary Scott Bessent at least appears to understand some basic economics of tariffs:

“Tariffs can’t be inflationary because if the price of one thing goes up, unless you give people more money, then they have less money to spend on other things, so there is no net inflation.”

Inflation is a general increase in prices, i.e., a loss in the purchasing value of the currency relative to goods and services. So, technically Bessent is correct. But tariffs will still raise prices because they’re equivalent to a supply shock: they reduce the amount of goods and services that people can buy with the same amount of dollars, leading to a one-off increase in the price level (depending how much the exchange rate appreciates to offset the tariffs).

Government efficiency

The final swath of executive orders relates to Elon Musk’s Department of Government Efficiency (DOGE). I left out Vivek Ramaswamy because he was just axed from co-running DOGE after going on a rant about H-1B visas, a scheme both Musk and Trump have spoken positively about. Truly a ruthless department!

Anyway, Trump signed executive orders freezing most federal hiring for 90 days, halting new federal rulemaking, and ordering federal workers to return full time to in-person work. He also rescinded Biden’s executive order on AI safety across the federal government, leaving nothing in its place, and abolished all ‘diversity, equity, and inclusion’ programs, along with ’environmental justice programs’.

Finally, Trump created DOGE itself with its own executive order, although it has a much narrower focus than was originally advertised: it will be limited to “modernising Federal technology and software to maximise governmental efficiency and productivity”. Every federal US agency must create a DOGE team of at least four employees to implement its agenda.

That’ll no doubt help improve productivity on the margin, but it’s hardly a Javier Milei-style Ministry of Deregulation and Transformation, which has a much broader mandate:

“to assist the President and the Chief of the Cabinet of Ministers, in order of their jurisdictions, in everything concerning the courses of action for the implementation of deregulation, reform and modernisation of the state in order to re-size and reduce public expenses, and to improve the efficiency and efficacy of the organisms which constitute the National Public Administration, the transformation of red tape, the simplification of the state and the design and execution of public employee policies.”

It’ll be interesting to see how DOGE plays out given its narrower focus. Three lawsuits have already been filed against it, and if Musk is limited to “modernising technology” within the federal government then he may quickly become bored and give up.

The bumpy road ahead

Executive orders are the easy part. Trump now has to govern for four years, and the Republicans’ House majority is the narrowest in nearly a century. He will also have a hostile bureaucracy, with a recent survey finding that “80% of federal government managers who voted for Harris said they will resist the efforts of the Trump administration”.

Despite Trump now having four years of experience in government, most of his career has been in business. Many of his new appointees are also from the private sector. Former Clinton Treasury Secretary Robert Rubin recently cautioned about major differences between running a country versus a business:

“My advice to those new in government work is to approach the job with modesty. While government can benefit from a business perspective, government can’t and shouldn’t be run like a business. This is in part because government work requires skills and knowledge one doesn’t acquire in business. But also, importantly, there are at least three fundamental differences between private- and public-sector management.”

Those three differences are:

• Businesses focus on profitability, while governments must balance diverse and often competing priorities, making compromise essential.
• Business leaders operate in a centralised structure, while public sector leaders must navigate complex, shared authority with many stakeholders.
• Public sector leaders face far greater and more intense scrutiny than their private sector counterparts, particularly from political opponents and the media.

Rubin ended with a warning:

“I also recommend that outsiders arriving in Washington recognise how much they don’t know about government and how different it can be from business. The best way to make a successful transition to the public sector is to do so with humility. The alternative, in many cases, is to have humility thrust upon you.”

Whether Trump has learned these lessons remains to be seen.

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