Trump's team explores government-backed manufacturing boost - WSJ

Trump's team explores government-backed manufacturing boost - WSJ

The Trump administration has been actively pursuing policies aimed at reviving the manufacturing sector in the United States. Recent developments, including the One Big Beautiful Bill Act (OBBBA), have sparked significant interest among investors and financial professionals. The OBBBA, which was introduced to permanently extend several pro-growth provisions of the 2017 Tax Cuts and Jobs Act (TCJA), seeks to modernize American industry and bring back manufacturing jobs to the heartland.

One of the key reforms in OBBBA is the permanent establishment of 100% bonus depreciation. This provision allows businesses to immediately deduct the total cost of qualifying capital investments, including most manufacturing machinery and equipment. This change eliminates the penalty on capital-intensive investment, encouraging domestic manufacturers to invest in new equipment and expand production capacity .

Additionally, OBBBA introduces full and immediate expensing for research and development (R&D) costs. Prior to this reform, R&D costs were amortized over 5 years, which eroded the value of the deduction due to inflation. The new provision removes upfront tax penalties on innovation, promoting domestic investment and manufacturing .

Another significant aspect of OBBBA is the allowance for businesses to immediately deduct the cost of constructing new factories and structures that produce or refine American-made goods. Under prior law, these costs were recovered over a depreciation schedule of up to 39 years, which was a complex and burdensome process. The new provision ensures that there are no direct tax penalties on building new factories in America .

The OBBBA also includes reforms to reduce bureaucratic delays in the permitting required to build factories. It adapts the National Environmental Policy Act (NEPA) to allow project developers to obtain expedited environmental reviews by paying a fee of 125% of the estimated cost of such a review. This streamlines the NEPA permitting process, accelerating the construction of mines, oil and gas wells, and power plants that produce cheap and reliable energy required for reindustrialization .

Furthermore, OBBBA expands 529 educational savings accounts to cover costs associated with a broader range of apprenticeship programs and trade training and licensing. This reform is aimed at ensuring that firms can find highly skilled workers to operate machinery and equipment, strengthening domestic production capabilities .

These reforms are part of a broader effort by the Trump administration to boost domestic manufacturing by further rolling back regulations and fixing America’s outdated tax system. While the OBBBA is a significant step, it is not the end of the administration's efforts to revitalize the manufacturing sector.

In parallel, the Federal Reserve has initiated its first interest rate cut since December, reducing it by a quarter-point to 4.1%. This move is a response to growing concerns about the health of the nation's labor market. The Fed projects two more cuts this year and one in 2026, signaling a shift in focus from inflation to employment .

Together, these policies aim to lay the foundation for a new era of American reindustrialization, providing investors and financial professionals with a clearer picture of the administration's commitment to bolstering the manufacturing sector.