Politics, Programs and Policy: What’s the prognosis for GBS?

Any changing of the guard at the top of the U.S. government has the potential to create shock waves in financial markets, regulation, supply chains—it can be a long list. With Donald Trump now set to reprise a term as U.S. President, this time with a legislative body that will likely be fully aligned with his policies, what are the implications for global business and shared services?

Trump ran a red-meat campaign, focusing heavily on issues related to globalization, immigration, the economy, and culture. With America First as a major pillar of his administration, what are the implications on GBS and shared services? Taking a view from Trump’s statements on the campaign trail and previous executive and legislative initiatives, we’ve made some predictions about how organizations could be impacted by changes in U.S. policy and programs. Some mean a flurry of activity; others may impact enterprises’ appetite to globalize work.

Let’s examine the more salient pronouncements one by one.

Changes in Tax Policy

In the short term, lower taxes may enhance profitability but could also lead to increased budget deficits and potential inflationary pressures, affecting economic stability which always impacts GBS operations, During his previous administration, Trump supported tax reforms that included lower corporate tax rates overall, partly to make the U.S. a more attractive business environment compared to lower-cost countries. This aligns with his belief that a lower tax rate for onshore production could stimulate domestic job creation.

In addition to extending tax cuts from the 2017 Tax Cuts and Jobs Act, which permanently lowered the corporate tax rate from 35% to 21%, Trump has called for lowering the corporate tax rate to 15% for certain companies. He’s also proposed restoring companies’ ability to immediately deduct investments in equipment and research.

This has implications for GBS’s scope.

For enterprises, the most immediate impact is likely upon corporate planning. Get ready to revisit long range plans and capital allocations. If GBS teams perform modeling and analysis for FP&A and tax, the workload could increase as enterprises reforecast, realign and potentially shift investment strategies to take advantage of changing tax policy.

The president-elect has also rolled out a series of targeted tax breaks, including eliminating federal taxes on tips, Social Security benefits and overtime pay. GBS organizations managing payroll will not only experience a flurry of activity to recalibrate inputs, but also manage increased help desk and inquiry activity. Change management and communications will be stretched to ensure that impacts are understood, as the gap between worker expectation and reality is likely to present challenges, especially in enterprises with substantial hourly and unionized workers.

For the enterprise, lower taxes may enhance profitability but could also lead to increased budget deficits and potential inflationary pressures, affecting economic stability.

Trade Policy and Tariffs

If campaign promises hold, the new administration is expected to implement protectionist trade policies, including imposing a universal baseline tariff of 10% on all imports, with higher rates on specific goods, such as a proposed 60% tariff on Chinese products. Trump has also said he will renegotiate the USMCA trade deal his own administration struck with Mexico and Canada.

What are the implications for GBS?

First, these changes are likely to impact supply chains and increase the cost of goods sold, forcing enterprises to make tough decisions about how to absorb or pass cost through to customers and consumers. GBS is likely to not only participate in the analysis and sourcing changes, but also to be charged with providing additional savings to mitigate rising input costs.

Trump has proposed imposing tariffs on goods produced by U.S. companies that move manufacturing or service operations abroad. By making it more expensive for companies to import goods back into the U.S., the intention is to discourage firms from shifting jobs and production to lower-cost countries.

Second, to counterbalance these penalties, Trump supports tax incentives for companies that keep or bring back jobs to the U.S. One approach discussed is a significantly reduced corporate tax rate for companies manufacturing within the country, compared to those with substantial offshore operations. This policy aims to make it financially attractive for businesses to choose the U.S. as a production base.

Likely the impact will be directly felt by federal contracting Trump has suggested changes in federal contracting to favor companies that rely less on offshoring. Under his proposal, companies bidding for U.S. government contracts could be at a disadvantage if they have significant outsourcing practices. This would primarily affect sectors like defense and infrastructure, where government contracts drive the majority of revenue.

Given this climate, will business leaders avoid moving other business services outside the country? Given the success of globalization in tapping talent, providing business continuity and delivering cost benefits, it’s hard to imagine business leaders moving away from these models. But will some C-Suite leader get nervous about moving work and raising the ire of the Commander in Chief? And might GBS leaders face pressure to keep work onshore to avoid such scrutiny? Watch this space carefully for impact to current and future strategies for location and work placement.

Immigration and Workforce

Trump has expressed skepticism about work visas for jobs that could potentially be filled domestically. Though not directly about offshoring, limiting these visas is part of his broader effort to prioritize American labor in fields where offshore support and visa-based labor intersect. Because GBS harnesses the power of global talent, the impact may be considerable.

Stricter immigration policies, including potential reductions in H-1B visas, may limit access to skilled foreign labor, impacting sectors like technology and business services that rely on such talent

But there are also operating implications. In Trump’s first term, HR shared services teams – particularly those chartered with employee data analysis – saw significant workload to identify workers potentially impacted by the changes to immigration and work status and to manage the influx of queries from concerned employees. Travel bans and restrictions may also impact corporate travel teams within the GBS. Talent acquisition and employee mobility strategies may also be disrupted, and companies may be required to adjust their talent acquisition strategies.

Regulatory Environment

A shift toward deregulation is widely anticipated, particularly in sectors such as finance and energy. While reduced regulations may lower compliance costs for businesses, they could also introduce uncertainties, especially for companies operating across multiple jurisdictions with varying regulatory standards.

While GBS will likely be tapped to analyze and implement regulatory changes, the immediate impact is unclear. Will enterprises discontinue operations in certain countries, changing the global delivery map? Will reduced regulation offer an opportunity to simplify and streamline process flows? The jury is out – for now.

ACA and Healthcare Reform

The administration has vowed to make significant changes to the Affordable Care Act (ACA). The reverberations could include an erosion of the ACA’s consumer protections, the imposition of work requirements in Medicaid and funding cuts to the safety net insurance, and challenges to federal agencies that safeguard public health.

GBS and HR shared services teams that administer benefits are likely to see increased workload to analyze and adapt benefit schemes, work with providers, and educate employees about shifts in benefits and coverage.

Global Economic Relations

The anticipated protectionist stance may strain relations with key trading partners, leading to increased trade conflicts and economic fragmentation. Will this impact the incentives that key business services locations offer to American companies as a reaction?

Many GBS teams, by design, support the enterprise’s ability to operate in complex international markets. Changes in economic relations that increase barriers to trade and make doing business harder will be felt in the GBS across all workstreams from talent and human resources to compliance and ability to easily conduct business in offshore locations.

Trump’s policies on offshoring and outsourcing suggest a reversal of a decades-long trend of globalized production, with significant potential ramifications for businesses and labor markets in both the U.S. and abroad. Will enterprises bring business services work back home? Will it become more difficult to globalize work in light of regulations? Will the economic advantages of the model shift downward?

We’ve been here before. Will this administration change the work and the way GBS organization work? Stay tuned…