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President Trump had his fair share of verbal scuffles with technology companies during his election campaign. But now that’s he’s the president, his stance on federal funding for new technologies, tax credits, and his push for more American manufacturing could have ramifications for many companies, including publicly traded ones betting on the Internet of Things (IoT).
A few months ago, BI Intelligence published some forecasts on how Trump’s presidency was likely to affect the growth of the Internet of Things and the companies behind it; now that the inauguration is over, it’s worth giving this information a good look over.
Here’s what could change:
Funding for smart city projects could dry up
In fiscal 2015, the federal government spent $8.8 billion on IoT projects, and from fiscal 2011 through 2015, it spent a total of $35 billion for IoT infrastructure, software, and cybersecurity. One project involved an investment in smart cities that allowed AT&T (NYSE:T) bring IoT connectivity to 10 cities across the U.S. for lighting, transportation, parking, and safety features.
But the BI Intelligence report noted that smart city projects will likely “stall or be abandoned due to a lack of federal support from a Trump administration.” That’s because Trump plans for taxes would reduce federal revenues by $9.5 trillion over 10 years, leading to a major spike in the national debt and leaving funding scarce for such high-tech infrastructure investments. They further note that given Republicans’ refusal to acknowledge climate change, programs that subsidize energy-efficient or green technology projects — many of which have IoT aspects — are likely to have their funding cut or canceled outright.
That’s important not just for AT&T and its smart city projects, but also for broader American IoT innovations. I’ve written before that China is leading the way in the IoT because its government has committed to spending lots of money to help companies develop new technologies. If the Trump administration backs away from IoT investments, expect China’s lead on the U.S. to widen even further.
Self-driving car innovations could slow
If you’re thinking that Trump couldn’t possibly have influence over the autonomous car revolution, consider that electric-vehicle maker Tesla Motors (NASDAQ:TSLA) has released some of the most advanced semi-autonomous hardware and software to date.
Many of Tesla’s vehicles are purchased with the help of federal tax credits, but under Trump — who does not have a particularly fond view of environmental policies — green energy tax incentives could be reduced or eliminated.
Tax credits of this type have pushed down the cost of current plug-in electric cars like the Model S, and could help reduce the cost of the cheaper, upcoming Model 3. New versions of the Model S and the upcoming Model 3 will have a full suite of self-driving hardware built into them, but if that green tax credit disappears, as an analyst from AutoPacific believes it could, then the higher prices could significantly slow the sales growth of Teslas specifically, and impede the spread of driverless car technology in general.
Automation might be less desirable
A big part of the IoT involves companies using an internet connection and sensors to automate systems and analyze data. In the manufacturing sector, General Electric (NYSE:GE) uses internet-connected machinery and software to increase plant efficiency, both in its own factories and in those of other companies.
In huge plants, keeping track of all the physical parts used to manufacture a product can be tricky. So instead of keeping the chaotic and cost-prohibitive old systems (where people would run around a plant trying to track down parts) GE created its Work in Process Manager — powered by its Predix software — that automatically tracks manufacturing. The company says that the system allows supervisors to “immediately know where any parts or components are in the plant.”
Trump wants to increase the number of manufacturing jobs in the U.S. which isn’t a bad thing. But that could lead to him attempting to put pressure on manufacturing companies to keep people employed in jobs that could instead be automated with IoT tech like GE has developed. If companies fear that using IoT systems to become more efficient will put them in conflict with the administration, expect to see some businesses submit, even if it means their expenses are higher than they would have been by adopting the newest technology.
Of course, there’s no guarantee that Trump will cut green tax credits, reduce federal funding for new smart city projects, or put any federal pressure on companies that will impair manufacturing innovations. But he has certainly indicated that he’s willing to push hard against companies when he doesn’t agree with what they’re doing — and that means IoT investments could certainly be at risk.
Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Tesla Motors. The Motley Fool owns shares of General Electric. The Motley Fool has a disclosure policy.
