Special Washington Update: What to Expect From Washington in 2025

After a contentious presidential campaign (and a decisive result), Donald Trump will begin his second term as president in 11 days. He will be joined by a narrow majority of Republicans in the House and Senate. This power arrangement gives Trump and Republican lawmakers opportunities to enact certain laws and policies that they haven’t had in recent years. Whether they can be successful will depend on their ability to be unified in their voting (particularly in the House) and to properly read any mandate voters gave them.

Trump and Republican lawmakers know they have the next two years of being in the majority. The mid-term congressional election in 2026 may bring a Democratic majority to the House. For this reason, 2025 will be a packed year for Trump and Republican lawmakers to be aggressive in enacting their preferred policy agenda. The agenda will begin with those issues that Trump believes he has a public mandate to act on – particularly illegal immigration – but certainly will extend into many other policy areas.

Below are our thoughts on the issues and developments that will occupy Washington policymakers’ attention this year. We try to align the campaign rhetoric and promises with the unique rules and procedures of Congress and the executive branch that must be followed to enact them. We also try to list them in a rough chronological order and not necessarily in order of importance.

More Funding for Immigration and Other Reforms.

Later in January, the House and Senate will begin a two-step “budget reconciliation” process to provide significant additional funding for immigration enforcement, defense and energy reforms. The first step will be passing a budget resolution, which will provide for broad funding level targets, instructions on how subsequent bills should provide this funding and how the budget deficit will be impacted. Republican lawmakers likely will pass this resolution in late January or February. The second step will be passing the actual bill(s) to provide the funding specified in the budget resolution. Funding will focus on the continued construction of a border wall, more border patrol personnel and the construction of facilities to temporarily house migrants at the border (including many to be deported). Reconciliation provides procedural advantages (only a simple majority rather than 60 votes to pass in the Senate) but is also complicated and time-consuming. The second step will take longer -- a few months -- to complete. Funding to assist in the immigration enforcement and deportation effort should be on the ground by Memorial Day after all of these procedural hurdles are crossed.

Debt Ceiling.

President Trump and Republican leaders are adamant that an extension of the debt ceiling will be included in the first budget reconciliation bill (first bullet). We believe this will indeed occur, largely because it will be a top priority for the President. However, given the past difficulties in Congress of passing any increase in the debt ceiling, it can’t be ruled out that this may not happen as a part of the first reconciliation bill. A few House Republicans may balk at extending the debt ceiling if the reconciliation bill doesn’t include adequate deficit reduction measures. In this case, Congress would have other opportunities to extend the debt ceiling, such as part of the bill to extend government spending in March or in a second reconciliation bill in the early summer. Nonetheless, we predict the debt ceiling extension will be approved as part of that first reconciliation bill to be considered early this year and that there won’t be drama around the issue as there has been in the past.

Executive Actions.

Following his inauguration on January 20, President Trump will move swiftly to take executive action to change certain immigration and energy policies. These initial efforts to change federal policies and rules will complement the actions Congress plans on initiating this month on these same issues (as noted above). In particular, he will declare illegal immigration a “national emergency.” This step would unlock the availability of greater resources from various federal agencies (including the Defense Department) to assist in enforcement and deportation efforts. Some of the actions in both of these policy areas will be effective immediately (like the diversion of federal resources and changes to the asylum program), while others (increased access to federal lands to drill for oil and gas and the end of a ban of US liquified natural gas exports) will need to go through a formal and public review process. The President also will initiate other regulatory reduction initiatives across a wide range of sectors (see next bullet), which will be an ongoing theme over his time in office.

Deregulation.

Efforts to roll back regulatory requirements were a big feature of the first Trump administration and will be once again. The deregulatory push will impact many sectors, but key areas of focus will be energy, environmental and financial services regulations. In the near-term, a Trump administration will halt most non-finalized regulations, delay the implementation of most rules set to take effect and initiate a review of all Biden-era regulations. However, regulators will need to follow a lengthy process of notice and comment to actually unwind Biden-era regulations. A fully Republican Congress also could use the Congressional Review Act (CRA) as more of a fast track to knock down regulatory requirements, but only those finalized toward the end of President Biden’s tenure would be in scope (in 2017, a Republican Congress and Trump administration used the CRA to vacate an unprecedented 16 Obama-era regulations). In addition, some existing regulations are subject to ongoing legal challenges and could be overturned in court. The new administration will focus broadly on easing regulatory requirements, and although it will start immediately on this initiative, the process will play out over months and years.

Tariffs and Trade Policy.

In late January, President Trump will initiate federal action to provide a basis for the imposition of new tariffs on imported goods. This likely will come via a formal review of US trade and tariff policies and their impact on national security. New tariffs could follow this review months later and likely will be targeted rather than broad-based. President Trump certainly will threaten more tariffs than he will implement. He will use the threat of tariffs frequently to seek concessions from trade partners. When the President does decide to move forward with new tariffs, they will not take effect immediately. They will need to go through a formal rulemaking process that will take months. Every country, including traditional allies, is potentially a target for new tariff threats, and potentially new tariffs.

Confirmation Process.

In late January and early February, the Senate will hold hearings and move forward with the approval of the highest priority nominees such as Treasury Secretary (Scott Bessent), Secretary of State (Senator Marco Rubio) and Attorney General (Pam Bondi). The Senate then will move toward approving nominees to head other federal departments and agencies in late February and March. Some of these nominees - specifically Pete Hegseth (Defense Secretary designee), Tulsi Gabbard (National Intelligence Director designee) and Kash Patel (FBI Director designee) – will face more challenges with their confirmation. We believe Robert F. Kennedy, Jr. (Health and Human Services Secretary designee) is on safer ground as of now. These nominees will have an opportunity to publicly express their views and credentials at committee hearings this or next month. Their confirmations may ride on how they hold up at the hearings. These nominations will be a focal point for the Senate in the first quarter of the year, with the most high-profile cabinet positions being considered first.

Ukraine.

February 24 is the three-year anniversary of the Russian invasion of Ukraine. Incoming Secretary of State Rubio will likely have been in office for a few weeks at this point. That could be enough time to begin preliminary negotiations with Ukraine and Russia about a potential peace deal. While an agreement will be a high-priority focus for the Trump administration, we think a mutually agreeable one for all sides will be difficult to craft and will be an ongoing process throughout the year.

Government Funding.

Government funding for fiscal year 2025 will expire on March 14 if Congress doesn’t act to extend it by this date. Congress and the White House will continue to work on a deal on government spending for the remainder of the year from now until then. This deal also could provide a basis for addressing other fiscal issues, such as an extension of the debt ceiling and possible federal spending cuts to lower the budget deficit. We believe a deal on government spending likely will materialize in mid-March and that it could result in flat or lower spending levels going forward. This may be the time we learn if Washington is serious about deficit reduction.

DOGE.

Though it is not a government agency and has no formal authority under law, the “Department of Government Efficiency” (DOGE), led by Elon Musk and Vivek Ramaswamy, will attract a considerable amount of attention. Throughout 2025, it will study issues, hold hearings, and participate in congressional panels. It also will feed the rumor mill of what may be included among its recommendations to improve government efficiencies (the planned release of a report formally outlining these recommendations isn’t due until July 2026). Expectations are high for this panel, and its high-profile leaders will be eager to publicly highlight their work. This will keep the panel in the spotlight virtually every week even though the final report isn’t due for another 18 months.

Tax Bill.

As we write this, one current strategy is to include tax reforms in the budget measure that was the subject of our first bullet above. However, we think there is a stronger chance that Republican lawmakers will use a separate and second reconciliation bill to deal with tax issues, and that this process will begin close to the summer. That effort will primarily focus on the extension of the expiring provisions of the 2017 tax law focused on individual taxpayers. There is also talk of including changes to the corporate tax rate and how multinational corporations are taxed on international profits. There also are discussions about how (if at all) to address some of the President’s campaign pledges, such as the elimination of taxes on tips, overtime wages and Social Security benefits. Suffice it to say, any tax bill will be a heavy lift for Republican lawmakers and President Trump in a political environment that demands some degree of fiscal restraint. Can Republican lawmakers extend the tax cuts and also move to address ways to reduce the deficit and debt to placate anxious voters? While some in the Trump camp have expressed a preference to have a tax bill completed in his first 100 days, we are skeptical and believe it will take most of the year to finalize.

G-7 Meetings.

Key world leaders in the G-7 will meet in Canada in June to discuss global developments. Given President Trump’s penchant for controversy and demands for policy changes to benefit the US, it is likely he will dominate the agenda. We don’t know what the world will look like in June, but it is very likely that tariff threats and security concerns involving Russia and China (at a minimum) will be top agenda items. One interesting dynamic will be with the new Canadian leaders and Trump’s stated desire to make Canada a part of the US. A lot will happen on that subject between now and June, but this could make for an awkward summit. How allies respond to a likely broad set of US demands will be the story to watch.

NATO Summit.

NATO will hold its annual summit in the Netherlands from June 24 to June 26. There will be keen focus at the summit on membership (possible Ukraine membership), European security concerns related to Russia, strategic challenges posed by China, and the funding obligations of its members. President Trump once again will insist that US security protection should not be afforded to members that don’t pay their required annual share of 2% GDP on defense. There is less unity on some of these issues among NATO members now than there was during the first Trump term. All eyes will be on whether NATO emerges stronger or weaker from this gathering, particularly from those of its adversaries.

Middle East.

October 7 will be the two-year anniversary of Hamas’ invasion of Israel. We expect President Trump to take more of a hands-off policy with regard to how Israel prosecutes the war against Hamas and others in the Middle East. Dynamics are moving quickly in the broader Middle East with the downfall of the Syrian government. The US will work closely with Israel to address those challenges and opportunities. It seems like Trump and Netanyahu have much in common with regard to how they want to respond to threats from Iran. These developments will evolve all year, though October 7 will be an important milestone given its anniversary date.

Election Day.

A few state and congressional elections will occur this month and again in April. Competitive state supreme court races in April in Wisconsin (a swing state) also will be held. However, gubernatorial races in the states of New Jersey and Virginia on November 5 likely will be most revealing this year with regard to voter sentiment about the Trump presidency. NJ currently has a Democratic governor, while VA has a Republican. These off-year statewide elections often focus on national developments and, as such, this year’s contests will closely track Trump’s performance in office in 2025. Democrats will try hard to make a comeback and point to a first step toward winning the presidency in 2028 if they win both seats. If Republicans win both seats, it will only deepen the political hole Democrats are in.

Wild Cards Throughout the Year. Early in the year, President Trump is expected to make various pardons, including many or possibly all of the individuals convicted for crimes related to the January 6, 2021, attack on the US Capitol. Congressional leaders and Trump will work to see if there is the potential for a comprehensive deal on immigration reforms (in addition to what we already mentioned) that could include legalization of the status of “dreamers” and the end of birthright citizenship. We don’t believe this effort will be successful. All year, there will be significant focus on House Speaker Mike Johnson’s fragile predicament and in-fighting among Republicans on deficit reduction. Democrats will try to rebuild, and perhaps some new leaders will emerge from among them. Finally, we don’t believe the US will take over Greenland, the Panama Canal or Canada.