Investing.com - U.S. President Donald Trump's decision to order the Treasury to cease production of the penny would likely survive judicial review, according to analysts at TD Cowen.
On Sunday, Trump said he would instruct the Treasury to stop minting pennies, calling the process wasteful. In particular, he flagged in a social media post that producing pennies "literally" costs the U.S. more than two cents, adding that he wants to "rip the waste" out of the federal budget "even if it's a penny at a time."
The cost of making a single penny was about 3.7 cents in 2024, and the coin has cost above its face value to produce for 19 consecutive years, data from the U.S. Mint showed. It was not immediately clear just how much the government was spending on minting the coins.
Trump’s comments reiterate the president’s agenda of slashing government costs and reducing the fiscal deficit -- a goal that he has touted as one of his main priorities.
In a note to clients, the TD Cowen analysts argued Trump has the authority to eliminate the penny, citing a federal code which says the Treasury Secretary must mint and issue coins in the amounts necessary to meet the needs of the U.S.
"What that means, in our view, is that Treasury only needs to conclude the penny is not necessary in order to stop producing it," the analysts wrote, adding that the argument has "plenty of support."
They said that what remains key is whether the policy would be enacted through an executive order or legislatively. If it is only via Trump, the move could create demand for pennies as merchants would still be obligated to provide exact change to customers, leading banks to charge a premium for the coins, the analysts said.
Merchants could also face the choice of either having to round down to the nearest five cent increment or find creative ways to get their hands on a dwindling supply of available pennies, they flagged.
However, Congress could enact legislation that would hold merchants legally harmless if they round transactions to the nearest five-cent increment, which would allow merchants to avoid facing class action litigation, the analysts said.
Should customers object to the rounding of prices, electronic payments firms like Visa (NYSE:V) and Mastercard (NYSE:MA) and other real-time payment networks could stand benefit, they added.