Trump Tax Bill Boosts US Manufacturers with 100% Bonus Depreciation

The Trump tax and spending bill, signed into law, has provided significant tax relief to US manufacturers. The legislation allows companies to claim 100% bonus depreciation in the first year for investments in machinery and factories, reduces R&D expenses, and offers more favorable rules for interest deductions. These provisions are expected to encourage capital investments and boost the manufacturing sector's competitiveness.

However, the benefits of the tax cuts are tempered by the Trump administration's volatile trade stance. Many manufacturers had paused their investment plans during the debate over the tax bill, awaiting clarity on both the legislation and Trump’s tariff announcements. With the tax bill now law, manufacturers have one less thing to worry about, but the prospect of further tariffs continues to cloud investor confidence.

Charles Crain, managing vice president of policy at the National Association of Manufacturers, believed the tax provisions in the new bill could prompt some companies to invest in more projects. However, he claimed they could not project how much they would invest. Crain argued that tax was a huge impediment for businesses, and it’s “now off the table.”

Susan Spence, chair of the Institute for Supply Management’s Manufacturing Business Survey Committee, commented that the ever-changing tariff environment makes it difficult for companies to price their products accurately, leading to frozen investment decisions.

Recently, Trump sent tariff notices to multiple countries, warning of additional levies, though he maintained that trade agreements were still on the table. He sent letters to at least 20 countries, including Brazil, the Philippines, Japan, South Korea, Indonesia, and Bangladesh. He also pushed back the Wednesday deadline to August 1 to implement tariff measures.

The Trump administration also weighs a 50% levy on imported copper. Trump claimed the levies will build a “dominant copper industry” and reverse Biden’s policies. However, industry executives warned that constructing copper mines and smelters in the country isn’t a quick fix and could take years, and manufacturers would still need to depend on imported copper, hence disapproving of the proposed levies.

Nonetheless, Leigh Lytle, CEO of the Equipment Leasing and Finance Association, acknowledged that while tariffs remain a concern, the new tax provisions offer “long-term certainty” that businesses require. She believes these provisions will motivate companies to accelerate purchases and increase hiring.

After the introduction of 100% bonus depreciation in the 2017 tax act, capital spending augmented, though at the time other factors were in play, including reductions on the corporate tax rate.

Michael Hicks, an economics professor at Ball State University in Indiana and director of its Center for Business and Economic Research, made it clear that he thinks tax provisions alone will not encourage significant investments this time. He added, “In the end, the ‘best case’ likely tariff scenario adds far more costs to most capital investment than this legislation could possibly offset.”

Pantheon Macroeconomics economists also claimed that project firms will stall their investment plans until the tariff situation is resolved.

The tax and spending bill, colloquially known as the “One Big Beautiful Bill” (OBBB), signed into law by President Trump on July 4, 2025, represents a significant overhaul of federal tax law since the 2017 Tax Cuts and Jobs Act (TCJA). The bill includes permanent and enhanced tax-reduction provisions that were scheduled to sunset at the end of 2025. One of the key provisions of the OBBB is the tax cuts instituted for US manufacturers, which allows companies to immediately deduct the full cost of new factories that break ground after January 19, 2025. This provision is aimed at encouraging investment in manufacturing and boosting the sector's competitiveness.

The OBBB also includes other significant tax impacts for businesses. It makes permanent the 20% “qualified business income” deduction, which was scheduled to expire at the end of 2025. This deduction is available to proprietorships, partners, and S corporation shareholders on their non-service business income. The bill also increases the maximum amount a taxpayer may expense for purchases of eligible depreciable property from $1 million to $2.5 million, and the phase-out threshold from $2.5 million to $4 million. Additionally, the OBBB permanently reinstates 100% bonus depreciation for qualifying property, including property with a recovery period of 20 years or less, such as certain machinery and equipment, that is acquired and placed in service after January 19, 2025.

The bill also includes provisions to enhance and extend the Qualified Opportunity Zone (QOZ) program, which was established to encourage economic growth in distressed communities by offering tax incentives to investors who reinvest deferred capital gains in QOZs. The OBBB makes the QOZ program permanent, with new QOZs designated every ten years. It also introduces rolling ten-year QOZ designations, tightening eligibility, and expanding reporting requirements.

However, the benefits of the OBBB for manufacturers are tempered by the president's erratic trade policy, which has raised concerns among manufacturers and held off investments. Proposed tariffs have created uncertainty in the manufacturing sector, making it difficult for companies to plan for the future. Despite the tax cuts, the threat of tariffs and the resulting trade tensions have led some manufacturers to hesitate in making significant investments in new factories or equipment. The OBBB's tax cuts for manufacturers are a significant win for the sector, but the ongoing trade policy uncertainty poses a challenge to the bill's intended benefits.