“Big Beautiful Bill”: These are the winners and losers of Trump’s tax package

Now it's official: Last Friday, on Independence Day, US President Donald Trump signed his controversial tax and spending bill into law. The "One Big Beautiful Bill Act" (OBBBA) is coming, and is intended to stimulate the American economy through massive government borrowing. The stock markets had apparently already priced in the proposed legislation. Trading was suspended on Friday due to the holiday, and on Monday the S&P 500 closed around 0.8 percent lower, which was likely due to the US President's renewed tariff threats. Market observers are divided on how the American economy will react to the fiscal package in the long term. In the short term, some sectors are likely to benefit particularly, while others will lose out.

First and foremost, the package of measures provides for a series of tax cuts. "The ongoing fiscal stimulus should continue to support the economy and the markets," conclude analysts at Berenberg in a recent market commentary. However, the long-term effects are controversial. The debt ratio is a particularly relevant metric here. Currently, the ratio of publicly held government debt to gross domestic product (GDP) is around 100 percent in the United States.

According to the White House, the OBBBA will reduce debt in the long term. They project that the debt-to-GDP ratio would reach 117 percent in 2034 without the package of measures. With OBBBA, it is expected to fall to 94 percent. Many market participants, however, view the situation much more critically. For example, the Committee for a Responsible Federal Budget (CRFB) predicts that the legislative package will increase the debt-to-GDP ratio to 127 percent.

The more debt a country takes on, the more interest it has to pay on that debt. "A further rise in interest rates would, in principle, be problematic for the economy," commented Feri Chief Economist Axel Angermann. "Consumption data are also showing initial signs that Americans' purchasing power is no longer entirely positive."

However, some sectors will benefit from the new legislative package. First, depreciation allowances for the purchase of equipment will be increased, which should particularly benefit production-intensive sectors such as manufacturing. Second, a tax rebate is planned for research and development expenditures, which could be beneficial for research-intensive sectors such as the healthcare sector. Furthermore, there are additional funds for the military: more money is to be channeled into shipbuilding, air and missile defense, and munitions and nuclear weapons programs.

Donald Trump's new mega-legislative package is being blasted as a gift to the rich and an attack on the welfare state. But some elements could actually benefit the US economy.

Things are looking significantly worse for renewable energies , however. Tax breaks for investments in wind and solar power plants are being eliminated, as are credits for clean electricity. Instead, nuclear and fossil fuels are to be subsidized in the future. This primarily benefits the oil and gas industry.

The picture in the automotive industry is mixed. Those producing in the USA benefit from higher depreciation options for operating equipment thanks to the OBBBA. Furthermore, interest on car loans will be tax-deductible in the future, which could boost sales. However, this requires that the cars were finally assembled in the USA. Furthermore, subsidies for electric cars – a business area in which a majority of automakers are now active – will be eliminated. Under the Inflation Reduction Act, buyers received subsidies of up to $7,500 for new vehicles and $4,000 for used cars, depending on the model.

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For German automakers in the US, the abolition of the electric car subsidy could even have a positive impact. They were already excluded from the subsidy because they used foreign components. Without the subsidy, models from Tesla and others will become more expensive, making vehicles from foreign manufacturers more competitive. VW, Mercedes, and BMW, which also produce cars in the US, are also likely to benefit from the tax breaks for company equipment. Porsche and Audi do not have US factories, so they will likely face more difficulties in the US market in the future.

But even if the OBBBA initially improves the situation for German manufacturers, it does not yet resolve the market risks in the US. The tariff conflict is already leading to significant cost increases: 25 percent tariffs apply to imported vehicles and 50 percent to steel and aluminum products.