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Trump Calls for End to Penny Production to Combat Government Spending

In a significant move aimed at reducing government expenditures, U.S. President Donald Trump has announced a directive to cease the production of new pennies. This action, as stated in a post on Truth Social, is based on the assertion that minting these coins is an “inefficient” use of resources. Trump emphasized the need to eliminate waste from the national budget, regardless of how seemingly minor it may appear, stating, “For far too long the United States has minted pennies which literally cost us more than 2 cents.”

However, the legal basis for Trump’s decision has raised questions. According to the U.S. Constitution, the power to coin money is predominantly reserved for Congress. Legislative provisions allow the Treasury Secretary to mint coins as deemed necessary for the country’s financial needs.

Despite the uncertainty surrounding presidential authority in this area, some financial analysts foresee a potential shift in coin production. Jaret Seiberg from TD Cowen indicated that if the suspension of penny production withstands any legal challenges, it could trigger a shortage of pennies, impacting merchants and banks financially. Seiberg noted, “We believe this order would survive judicial review, which is why this is likely to occur. We worry about this leading to a shortage of pennies, which could force merchants to pay banks more for coins.”

Such pricing pressures might also encourage a transition towards electronic transactions, benefitting financial technology companies like Visa and Mastercard, as well as other payment processing platforms.

The economic rationale behind this decision is strengthened by the fact that it costs significantly more to produce a penny than its actual value. In 2024, the U.S. Mint disclosed in an annual report that the manufacturing cost of each penny reached 3.69 cents. This marks the 19th consecutive fiscal year that the expense of producing pennies has exceeded their face value.

The latest findings from the U.S. Mint indicate that the nickel might also be at risk, with the production cost for each five-cent piece amounting to 13.78 cents. This statistic raises further concerns about the sustainability of these lower-denomination coins in the current economic landscape.

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