Regulatory Alert: President Trump Issues Order Directing Agencies to Take Deregulatory Action
February 3, 2025
On Friday evening, President Trump issued an executive order directing each federal agency to ensure that at least 10 existing regulations or guidance documents are repealed if such agency seeks to promulgate a new regulation or guidance document. In addition, the order effectively requires agencies to reduce the overall cost of regulatory compliance across the federal government in the short term. The directive, informally called the 10-for-1 rule, is part of the administration’s “deregulation” agenda and builds on President Trump’s similar “2-for-1 order” issued back in 2017.
The obvious implication from the executive order is that federal agencies must satisfy a much higher standard to promulgate new regulations that impose costs on an industry, although there are exemptions for rules associated with national security and homeland security. Unlike the 2017 order, which required that the overall cost impact of new regulations remain at zero, the order signed on Friday requires that costs be significantly less than zero. That is a notable distinction and explains why this is considered a deregulatory initiative. Based on the directive, we expect one positive impact is that agencies, such as the Federal Aviation Administration and Environmental Protection Agency, should be more receptive to policy proposals that reduce regulatory cost burdens on industry.
It is worth noting that although the order was signed on Friday, the White House has only published a general “fact sheet,” not the full text of the order. Multiple news outlets, however, have cited to a copy here obtained by the American Presidency Project.
Summary of Order. The executive order establishes the Trump administration’s policy to “alleviate unnecessary regulatory burdens” imposed by the federal government. To that end, whenever an agency proposes a new regulation or guidance document, the agency must identify at least 10 existing regulations or guidance documents to be repealed. This is informally known as the 10-for-1 rule. More importantly, the order also sets forth a “regulatory cap” for 2025 and each year thereafter:
- Regulatory Cap for 2025: For fiscal year 2025 (FY25), the order directs all agencies to ensure that the total cost of all new regulations being finalized this year is significantly less than zero, as determined by the Director of the White House's Office of Management and Budget (OMB). (No specific amount is identified.) This effectively means agencies must repeal regulations to ensure there is a net benefit from all new regulatory activity, i.e., deregulation.
- Regulatory Cap for 2026 and Beyond: For years after FY25, the order is less specific and instead allows the OMB Director to identify to agencies the total amount of costs that “will be allowed for each agency in issuing new regulations and repealing regulations.” The order provides discretion to OMB to allow an agency to increase costs in a future year after FY25 or require a further reduction in costs.
The order specifically exempts from the 10-for-1 rule and regulatory cap (a) any regulations or guidance issued “with respect to a military, national security, homeland security, foreign affairs, or immigration-related function,” and (b) any other regulation or guidance determined by the OMB to be exempt. Any regulations or guidance documents required by Congress would also be exempt from the directive.
Analysis and Key Takeaways. Based on our review, there are several key takeaways from the new 10-for-1 executive order.
- First, the most obvious implication is the order establishes a higher standard for an agency to issue a new regulation that imposes costs on an industry. Perhaps more importantly, agencies should be more receptive to proposals to revise or repeal regulations or guidance that will provide quantifiable benefits to an industry or society in general. The exception will be agencies that may use one of the exemptions outlined in the order, such as the Department of Homeland Security.
- Second, it remains unclear how an agency will determine what constitutes a “regulation” or “guidance document” for purposes of complying with the 10-for-1 rule. The OMB is responsible for implementing the order and developing guidance for agencies to ensure they comply. The OMB’s guidance must also explain how agencies are expected to estimate the costs or benefits of a particular regulation or piece of guidance.
- Third, the order takes a more aggressive deregulatory approach in the near term, specifically FY25, while providing more flexibility to OMB and agencies to promulgate new regulations in future years. However, as a general matter, we do not expect that agencies will be allowed to engage in new rulemaking initiatives that impose meaningful costs on an industry.
- Finally, the 10-for-1 rule may create confusion because, on its surface, it suggests that all new regulations will be difficult to promulgate. That is unlikely the case. In fact, rulemakings that provide societal benefits—measured through the required cost-benefit analysis—are expected to be encouraged because those types of regulations, or changes to regulations, could be used to offset costs associated with new rules.
