Strategic Analysis of Trump 2.0 Policies and Their Potential Impact on the Off-Highway Equipment Industry

Scope of Analysis

• Starting 2025, the global trade and economic growth momentum will be a complex function of political, trade, and policy moves made under the second Trump administration in the United States.
• Following a 3.2% real GDP growth in 2024, the world economy is likely to maintain a 3.2%-3.3% annual growth momentum through 2028, with emerging markets maintaining their leaderboard positions in terms of economic growth.
• In our baseline, President Trump’s 25% tariff on all Mexican and Canadian imports and a 10% tariff on Chinese imports are considered, along with proportional retaliatory tariffs from Mexico and Canada.
• Between 2025 and 2028, within the base case, the impact on GDP will remain muted, with key Asian OEMs buoying global demand and economic growth. However, in the conservative scenario, adverse and protracted trade wars can potentially shave off 1.5% from global GDP growth in 2028, push global inflation beyond 6.0%, and induce multi-quarter recessions in economies such as the United States, Canada, Colombia, Mexico, Germany, and South Korea.

The Impact of Top 3 Strategic Imperatives on the Off-Highway Equipment Industry

Geopolitical Chaos

Why

The United States has levied 25% tariffs on imports from Mexico and Canada—
2 markets closely connected to the US auto market. Most brands in the United States depend on Mexico and Canada for sourcing and production.

Frost Perspective

Coupled with retaliatory tariffs, near-term impacts to North American volumes and inflation can be sizable.
Firms should prioritize real-time supply chain and inventory management to curtail shocks.
Local sourcing and production capabilities are a need rather than a potential option, especially in large markets such as the United States.

Disruptive Technologies

Why

Executive orders have been passed that seek to remove barriers to AI domination and strengthen leadership in digital finance.
Technology firms in the United States have been rapidly scaling up their capabilities around AI and the associated infrastructure.

Frost Perspective

Auto, steel, and aluminum producers are expected to benefit from the rapid proliferation of AI, leveraging it to cut waste in their systems by automating tasks and increasing efficiency.
AI will also enable automakers to rapidly advance their autonomous vehicle projects, leading to US automakers gaining a competitive advantage in this space.

Internal Challenges

Why

The Trump presidency phased out the $7,500 federal EV tax credit after 31 December 2025, removing a key demand incentive for battery-electric and plug-in hybrid vehicles.
The government also raised annual vehicle registration surcharges for EVs and hybrids by $200–$400 to offset lost fuel tax revenues.

Frost Perspective

Through its executive orders and policies, the US government seems to prioritize ICE vehicles over electric ones, which will force automakers to realign their vehicle portfolios for the country.
In the medium term, US off-highway stakeholders are expected to lose their EV capabilities and related competitive advantages in the global market.

Growth Drivers

• Asian OEMs—Beneficiaries of Friendship: Asian behemoths, India and ASEAN, will remain resilient amid strong friendship opportunities given their unmatched cost-competitiveness. Strong domestic economies will remain an important driver.
• High-tech and Fossil Fuel Economy: Semiconductors and AI will remain in the fiscal support spotlight through the medium term. Significant regulatory changes, including approvals for the development of oil and gas (O&G) on federal lands in the United States, will boost O&G opportunities in the country.
• Sweeping US Tax Reforms and Easing Interest Rates: US tax reforms (e.g., the proposal to slash corporate income tax to 15% from 21%) will spur private investments while easing interest rate burdens and supporting consumer spending. A resilient US economy will largely benefit global growth momentum, especially in developing and emerging markets.

Growth Restraints

• Decelerating Sustainability Investments: The US exit from the Paris Agreement and the likely freeze of financial and technological support commitments to developing and emerging markets will curtail sustainability and clean energy adoption and investments in these locations during the medium term.
• Trade Wars: The localization push has led to tariff disputes and protectionist policies, with political leaders supporting domestic industries rather than fostering global partnerships. Prolonged trade conflicts will slow trade growth as businesses and consumers deal with high costs.