How the Incoming Government Will Affect Retail Trade

The appointment of the world’s richest man, Elon Musk, as director of the new Department of Government Efficiency (DOGE), hand-in-hand with former Republican candidate Vivek Ramaswamy, seeks to dismantle government bureaucracy, reduce excess regulations and cut federal spending, among other provisions.

Musk and Ramaswamy will provide advice from outside the government, through an orientation that promotes a “merit” culture, a “merit” that involves working more than 80 hours a week, and that would be in line with an approach where innovation is driven by private initiative, with limited government involvement.

The new agency, which will work alongside the White House Office of Management and Budget, is presented as a significant effort by President-elect Donald Trump’s new administration to transform the workings of the federal state, aligning with Trump’s campaign promises of a leaner, less bureaucratic administration.

The main DOGE goals recommended by Musk and Ramaswamy include: the unwinding of government bureaucracy, reduction of excess regulations, decrease in federal spending, layoffs in federal plans, and mandatory face-to-face work.

These initiatives present both opportunities and challenges for trade. While reduced regulations and administrative efficiencies could benefit traders, reduced federal spending and layoffs could adversely affect purchasing power and market stability.

How these policies are implemented will be crucial in determining their ultimate impact on trade. Below, we discuss how each of these objectives could affect the sector.

1.) The dismantling of bureaucracy may speed up administrative procedures, which would generate benefits for retailers by allowing them to obtain permits and licenses more quickly. However, this measure may also cause uncertainty if it is observed that controls necessary to protect consumers and maintain a fair market are being eliminated.

2.) The reduction of excessive regulations can facilitate the activity of minority companies by reducing bureaucratic barriers and the costs associated with regulatory compliance. This could encourage new competitors to enter the market, increasing supply and possibly lowering prices for consumers. However, the lack of regulations could also lead to less ethical business practices, affecting product quality and safety.

3.) A decrease in federal spending could translate into fewer subsidies and aid to sectors such as retail trade. This could hurt small retailers that depend on these subsidies to survive in the face of large chains. Conversely, the reduction in public spending could affect consumers’ purchasing power, which would harm retail sales.

4.) Layoffs in the public sector may cause unemployment to grow. A reduced number of public employees means less disposable income to “spend” on goods and services, which has an impact on business sales.

5.) The imposition of mandatory face-to-face work may have mixed effects. On one hand, it could increase the influx of customers in commercial areas where public employees work, benefiting local businesses. On the other hand, it may increase operating costs for businesses, due to the need to adapt space or increase salaries, which could raise prices for consumers.