Will Policy Clarity Spark a New Wave of Economic Growth?

While tariff uncertainty continues to linger, the passage of the One Big Beautiful Bill provides business leaders with long-awaited policy clarity that may provide a boost to capital expenditure.

As we have been discussing since March, market participants have adopted a wait-and-see approach as they assess how an array of new policy directives from the Trump administration might unfold. This uncertainty has been fueled by ongoing regulatory shifts and evolving trade negotiations with key partners such as China and the European Union, making it challenging for businesses to plan with confidence.

Although uncertainty still surrounds the potential impact of ongoing trade policy negotiations, the recent passage of the One Big Beautiful Bill has introduced a greater degree of clarity to the policy landscape. By addressing several longstanding concerns, the bill provides tangible signals about the administration’s economic direction, helping businesses and consumers alike recalibrate their expectations.

U.S. Businesses Get a Boost

Consumers have demonstrated notable resilience amid the recent uncertainty. The new legislation is expected to reinforce this resilience by making the 2017 individual tax cuts permanent, a move that aims to provide lasting relief to households across income brackets. In addition, the bill introduces new, temporary deductions for tip and overtime income—measures targeted at supporting lower- and middle-income workers—and increases the Child Tax Credit, which should benefit families nationwide. Raising the cap on state and local tax (SALT) deductions also offers relief, particularly for residents of high-tax states. While these provisions are likely to bolster disposable income and sustain consumer demand, it is our view that business sentiment holds the key for the trajectory of future economic growth.

On the corporate side, the bill introduces several pro-growth measures aimed at stimulating innovation, investment and domestic production. Most notably, it allows businesses to immediately expense domestic software development costs as part of broader R&D deductions, reversing a 2017 rule that required five-year amortization. Under the newly created Section 174A, companies can now fully deduct qualified software-related costs—like programming, design and implementation—in the year they’re incurred. This change applies to tax years beginning after December 31, 2024, with small businesses eligible to retroactively amend returns (back to 2022) to claim refunds, boosting near-term cash flow. Importantly, the bill allows full expensing only for domestic software development, while foreign R&D must still be amortized over 15 years, a measure that reflects a policy focus on encouraging innovation and job creation within the United States and may influence corporate decisions on where to locate their development teams.

The bill also provides 100% bonus depreciation for qualified production property, including certain non-residential real estate used in manufacturing, giving manufacturers immediate tax savings. The advanced manufacturing investment credit was raised from 25% to 30%, further encouraging investment in high-tech domestic production and strengthening U.S. supply chains. Permanent tax credits for New Markets and Opportunity Zones were also introduced to drive capital to underserved regions. Collectively, these measures enhance tax planning flexibility, lower the cost of capital and support reinvestment in U.S. operations—benefits that are especially valuable to businesses amid ongoing tariff uncertainty and rising wage pressures.

Stalemate Broken?

Last month, we noted that the U.S. economy appeared to be at a stalemate, with business sentiment deteriorating, but no clear signs of broad-based layoffs. Recent employment data continues to point to a resilient labor market, as steady job creation and wage growth help underpin consumer spending. The passage of the One Big Beautiful Bill delivers much-needed policy clarity, addressing critical uncertainties that had weighed on corporate decision-making.

Nonetheless, a significant source of uncertainty remains due to the lack of resolution in ongoing tariff policy negotiations. Many businesses are still facing challenges as they weigh the potential impact of future tariff changes on supply chains, pricing strategies and global competitiveness. The absence of a definitive framework regarding tariffs means that companies must continue to plan for multiple scenarios and remain vigilant in their risk management.

Even so, the clarity and support provided by the One Big Beautiful Bill represent a decisive step forward for the business community. By addressing key tax and investment concerns, the new legislation has helped to restore confidence and inject renewed optimism into the economic outlook. As these policy changes take effect, there is growing potential for improved business sentiment to translate into increased hiring, investment and growth in the months ahead.