What to watch as Trump returns to office

Four years after leaving the White House, Donald Trump was sworn into office Monday afternoon, beginning his second presidential term. Hours later, he was in the Oval Office signing executive orders.

Why it matters: The new President and Republican-controlled Congress have called for sweeping changes that will likely affect many industries, including HVAC.

From federal incentives to taxes and tariffs, here are four developments for HVAC contractors to watch under the new administration. 

1 — Home Energy Rebates

The Inflation Reduction Act (IRA) of 2022 allocated nearly $9 billion for state-run programs, called the ‘Home Energy Rebates,’ offering point-of-sale rebates to homeowners who make qualified HVAC upgrades.

Driving the news: Trump has criticized the IRA and pledged, during his campaign, to “rescind all unspent funds” under the law.

State of play: As of January 17, nearly all states have been awarded Department of Energy (DOE) funding to launch their rebate programs, with 12 already up and running. South Dakota is the only state that opted out. 

• Trump on Monday night ordered federal agencies, including the DOE, to “immediately pause the disbursement of funds” under the IRA, but the text leaves unclear whether this includes funds that have already been awarded — or just those that haven’t.

What to watch: Experts say reclaiming awarded funds will likely prove difficult, but the order gives agency heads 90 days to “review their processes, policies, and programs for… financial disbursements” and report their findings.

The Department of Energy didn’t respond to a request for comment.

2 — Section 25C Tax Credit

The IRA also extended the nationwide ‘Section 25C’ tax credit through 2032, allowing homeowners to claim up to $3,200 on their tax returns for installing heat pumps and certain air conditioners and furnaces.

Driving the news: Republican lawmakers are crafting a multi-trillion-dollar tax bill and exploring cuts to existing incentives, including the Section 25C credit.

State of play: Industry groups AHRI and ACCA are advocating to preserve Section 25C, noting it represents less than five percent of the IRA’s total tax incentives. 

• AHRI recently urged the HVAC industry to sign a letter supporting its preservation.

What to watch: The fate of Section 25C remains uncertain as meetings begin this week between Trump’s team and Republican lawmakers.

3 — Corporate Taxes

The 2017 Tax Cuts and Jobs Act lowered the federal corporate income tax rate from 35 to 21 percent — but parts of it are set to expire this year.

Driving the news: Trump and Republican lawmakers aim to extend the law beyond 2025, with Trump proposing to further reduce the corporate rate to 15 percent.

State of play: While the corporate tax portion of the law was made permanent, lawmakers plan to reopen discussions on all aspects of it, leaving everything on the table. 

• Trump seeks not only to extend the bill beyond this year but also to make many of its cuts permanent. 

What to watch: House Speaker Mike Johnson plans to deliver a budget with detailed proposals, including which tax incentives will survive, by the end of February, according to Politico.

4 — Tariffs

Trump campaigned heavily on tariffs leading up to the election — and now holds the authority to implement them.

Driving the news: On Monday, Trump announced plans for 25 percent tariffs on Canadian and Mexican imports as early as February 1, having previously suggested an additional 10 percent tariff on Chinese imports.

State of play: Major HVAC manufacturers, including Lennox, Carrier, Trane, Rheem, and Daikin, both manufacture in Mexico and source components from China. 

• Additional tariffs would likely increase equipment costs, which are already set to rise due to the A2L refrigerant transition. 
• Import costs for HVAC equipment have risen 10 percent over the past five years but only one percent in the last year.

What to watch: Alongside his February 1 tariff comment for Canada and Mexico, Trump on Monday ordered federal agencies to review trade practices before determining next steps with China.