Trump orders U.S. Treasury to end penny production a financial strategy

President Trump halts penny production has instructed the U.S. Treasury to halt the production of new pennies, calling the process an unnecessary financial drain. Trump took to Truth Social, stating, “For far too long, the U.S. has been producing pennies that cost us more than 2 cents to make. It’s time to eliminate the waste from our nation’s budget, even if it’s just a penny at a time.”

The Penny Debate Resurfaces

This action rekindles a long-standing debate over whether to abolish the penny, a proposal that has failed to gain traction in Congress in the past. Advocates argue that eliminating the penny could save millions, pointing to Canada’s successful discontinuation of the coin in 2012 as a model for the U.S.

Concerns from Merchants and Consumers

Opponents of the move caution that removing the penny could create difficulties for both merchants and consumers, particularly for cash transactions that would require rounding to the nearest nickel. This could lead to minor inconveniences for customers and added complications for businesses handling small change.

Rising Costs of Minting Pennies

A report from the U.S. Mint revealed that the cost of producing a penny has surged by 20% in fiscal year 2024. The cost per penny increased from 2.7 cents in 2022 to 3.7 cents in 2024, with the federal fiscal year concluding on September 30.

Challenges for Merchants in Adapting

While President Trump holds the power to direct which coins are minted, experts like TD Cowen analyst Jaret Seiberg highlight potential difficulties for merchants. They may need to round cash transactions to the nearest nickel or find ways to manage an increasingly scarce supply of pennies.

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Congress Likely to Act if Penny is Phased Out

If the penny is removed from circulation, Congress is expected to swiftly pass legislation to allow businesses to round cash transactions to the nearest five-cent coin. This could streamline transactions but might still pose challenges for smaller businesses reliant on precise change.

Declining Coin Usage and International Trends

Coin demand has been falling steadily in the U.S., with an estimated $68 million worth of coins discarded annually. The move away from smaller denominations has also been gaining momentum in other Western countries. Canada phased out the penny in 2012, while Australia and New Zealand eliminated it in the 1990s. In these countries, cash transactions are rounded to the nearest five or 10-cent coins.

Government Efficiency Measures and Cost Reduction

Trump’s proposal comes alongside efforts from the White House’s Department of Government Efficiency, headed by Elon Musk. The department has reportedly saved over $1 billion by cutting wasteful federal spending. Musk’s team has been reviewing various government programs for cost reduction.

Financial Impact on U.S. Taxpayers

In a recent post on Musk’s X platform, the Department of Government Efficiency (DOGE) revealed that the penny cost U.S. taxpayers over $179 million in fiscal year 2023, underscoring the financial burden of the coin’s continued production.

President Trump halts penny production reflects a practical approach to reducing unnecessary government spending. While seemingly minor, this move could set a precedent for more efficient resource allocation, according to wsj digital subscription.