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The Trump economy has created a lot of losers among workers and consumers, yes, but also among businesses. Retailers are dealing with high tariffs. Auto and energy manufacturers have lost tax credits. Construction, agriculture, and other industries with significant immigrant workforces are having trouble retaining employees. Even health care, thought to be totally recession-proof, is showing cracks with the looming slashing of government funding and UnitedHealth’s troubles. A combination of sluggish hiring and higher inflation could tip the country into recession and have a spiraling effect.
But there are two winning sectors in the Trump economy: Big Tech and big banks. Due to positive trends and extremely favorable government treatment, banking and tech companies are absolutely soaring. And because they are among the biggest economic entities in the world and dominate the major stock indexes, the fact that more than half of the S&P 500 have reported declining earnings, as the Financial Times has reported, fades into the background.
Yet in an interesting twist, Wall Street and Silicon Valley are turning on each other, in an increasing number of high-profile regulatory fights. The future of the U.S. economy can be glimpsed in this battle between sectors that are not content to stay in their lanes and are taking their opportunity to essentially control the country.
Tech giants are using a vast storehouse of capital to build out data centers to power AI, a 12-figure capital expenditure that is propping up the U.S. economy almost by itself. The firms have more money to devote to this project because tax changes from the Big Beautiful Bill are delivering giant windfalls that tech is best positioned to take advantage of. Alphabet, the parent company of Google, is expected to take home nearly $18 billion in tax savings in this fiscal year alone, with $15.67 billion for Amazon, $12.45 billion for Microsoft, and roughly $11 billion for Meta. Beyond that, Donald Trump has become Big Tech’s personal lobbyist abroad, intimidating ostensibly sovereign nations to roll back digital services taxes and other regulations.
For its part, the financial industry is profiting from higher interest rates for their loans, and market volatility boosting equity income. The Securities and Exchange Commission (SEC) and the Consumer Financial Protection Bureau (CFPB) have been defanged, making compliance cheaper. Even investment banking has started to pop, perhaps reflecting a changing landscape where it’s easier to get merger deals done. Since changing course after the April “Liberation Day” announcement of tariffs, the administration has done whatever it takes to placate Wall Street, and happy investors translate to happy profits for banks and other financial institutions. Moreover, the Federal Reserve is weakening several capital rules that will allow financial firms to spin up more leverage, which can supercharge profits.
But whenever you get two big kids together, the odds increase that they’re going to fight. And because both banks and tech companies are edging their way into the others’ businesses, converging within the crypto industry (which has claims on both sides), these flare-ups are starting to happen with increased regularity. |
