President Trump’s Future Plans and the Effect on Manufacturers

As President Donald J. Trump is in office for his second term, he has outlined several tax and policy proposals that will have a direct effect on the U.S. manufacturing industry. From tax cuts to energy incentives, the proposed changes are designed to reduce costs, increase investment, and improve labor productivity, making U.S. manufacturing more appealing. Below are the key provisions that could reshape the landscape for manufacturers:

• Bonus depreciation – Under current law, bonus depreciation is limited to 60% of the asset cost for the 2024 tax year and will gradually decrease to 0% by 2027. However, President Trump proposes to reinstate the 100% bonus depreciation deduction for qualified property. This change would offer significant benefits to manufacturers who invest in assets such as machinery, equipment, furnishings and building improvements by allowing an immediate deduction in the year the property is placed in service.
• Research & Development – President Trump intends to restore the deductibility of research and development costs in the year they are incurred, rather than requiring them to be amortized over five years as current law dictates. This change would provide manufacturers, who are constantly seeking ways to improve products or processes, with an added incentive.
• Qualified Business Income (QBI) – Under current law, individuals can deduct 20% of qualified business income from passthrough businesses on their tax returns. This deduction is set to expire in 2026, but Trump intends to make it permanent. If enacted, this would significantly reduce taxable income when income from manufacturing entities passes through to the partners or shareholders.
• Corporate tax rate – The tax rate for C corporations is currently 21%. Trump proposes lowering this rate to 15% for companies who manufacture within the U.S., while reducing it to 20% for all other C corporations.
• Tariffs – Trump plans to impose new tariffs of 25% on goods imported from Mexico and Canada, and up to 100% on goods from China. While this may incentivize U.S. manufacturers to purchase goods made in the U.S. or alternative countries, it may also pose challenges depending on the availability and cost of other options. Manufacturers will need to carefully weigh the trade-offs between paying the tariffs or seeking alternatives.
• Energy costs – Trump has emphasized reducing energy costs for manufacturers producing goods within the U.S. by focusing on increasing domestic energy production, particularly through natural gas, coal, and oil. This would be a significant benefit to domestic manufacturers’ bottom lines by providing more affordable and reliable energy.

In conclusion, Trump’s proposed policies aim to create a more favorable U.S. environment for manufacturing. While some of these measures, such as the reinstatement of bonus depreciation and the reduction of corporate tax rates, offer clear financial benefit, others, like tariffs, may present challenges that manufacturers will need to carefully navigate. Although these are just proposals, it is never too early to begin evaluating how to leverage these potential adjustments to drive business growth.

For more information or assistance on how to navigate these proposed changes, please contact a member of HBK Manufacturing Solutions at 330-758-8613 or via email at manufacturing@hbkcpa.com.