The Trump Effect on US Manufacturing & Corporate Taxes

President Trump has expressed that his economic policies will be aimed at increasing domestic manufacturing and reshoring manufacturing to the United States through various initiatives, as well as the implementation of tariffs.

We will likely see the Trump Effect on U.S. Manufacturing & Corporate Taxes in four specific areas:

1. Reinstituting 100% Bonus Depreciation – Bonus depreciation for qualified property, plant, and equipment was part of the Tax Cuts and Jobs Act of 2017. Bonus depreciation under the TCJA included a gradual phase-out. The House of Representatives previously passed a bill to restore 100% bonus depreciation, but it narrowly missed passage in the Senate. However, it is expected to be included in the reconciliation bill in the new Congress.
2. Expanding R&D Incentives – The reconciliation bill in the new Republican Congress will also likely include a restoration of the R&D incentives that allow manufacturers to expense rather than capitalize R&D expenses.
3. Reduction of the Corporate Tax Rate from 21% to 15% – President Trump has expressed that this reduction will incentivize investment in U.S. manufacturing. It is unclear if his proposed reduction will be reserved for companies that do not outsource or offshore production and if those who do offshore will be given an opportunity to phase out overseas production.
4. Expanding U.S. Manufacturing Through the Defense Production Act (DPA) and 232 Investigations – These are both tools used by the U.S. government to address potential threats to national security. The DPA allows the government to prioritize and allocate critical materials during emergencies. Section 232 investigations are focused on determining if imports of certain goods could harm our national security and can lead to either tariffs or import restrictions.

Although the above may take time to fully implement, with lower taxes, investment & R&D incentives, and policies that seek to enhance the U.S. manufacturing base, there will surely be a Trump Effect on U.S. manufacturing and corporate taxes.