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Industry’s Outlook on Washington

January 24, 2025
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In the December 2024 PMA Business Conditions Report, PMA President David Klotz said, “Metal formers continue to demonstrate resilience despite economic uncertainty, driven in part by the delay in reinstating key tax provisions.” This statement could not ring truer, especially as it relates to how the policies coming from Washington, D.C., contribute to the industry’s outlook for 2025.

President Trump and the newly sworn in 119th U.S. Congress immediately face a deadline of their own making—January 1, 2026, when more than $4 trillion in tax increases begin taking effect. This is the “economic uncertainty” to which Klotz refers, and the impact is widespread, affecting defense spending, electric-vehicle transition, infrastructure investments and supply-chain health.

While we cannot predict the results of all actions stemming from Washington, manufacturers should factor in several scenarios. Much depends on whether Republicans in Congress can pass a government-spending bill and farm legislation; address the expiring tax cuts; repeal the Biden administration’s climate-focused Inflation Reduction Act; address the border and immigration; and expand oil and gas exploration. 

In the case of defense and national security, while the Biden administration provided $2.5 billion in additional security assistance to Ukraine in its final days, Congress failed to pass emergency spending to replenish the U.S. military, nor the FY 2025 budget. As the Trump administration seeks to quickly move on its agenda, it must overcome the failure of the previous Congress to complete government-spending legislation.

Before leaving in 2024, Congress maintained the topline defense-spending level at $895.2 billion, leaving out $21 billion in emergency defense spending sought by the Senate. Current government spending expires March 14. For manufacturers in the defense industrial base, the delay in funding means a possible slowdown in new orders and customers seeking longer payment terms. 

Also, within the first 100 days of the second Trump presidency, Republicans on Capitol Hill plan to move legislation, under a restricted process called reconciliation, to provide funding for immigration controls and the border. House GOP leadership likely can afford only a single defector, as Democrats are expected to oppose the partisan process for moving an immigration bill. 

This exercise, possibly paired with oil and gas exploration, will consume a significant amount of political capital for Republicans in Congress and for President Trump, without the certainty of passage. Ahead of the new year, President Trump (and Elon Musk) endorsed H-1B visas, raising the risk of lawmakers fighting amongst themselves for the first 100 days. And, despite the hopes of downstream suppliers to oil and gas customers, industry sources in Washington indicate that the promises of the Trump campaign may not materialize quickly, especially if tied to a stalled immigration effort. 

In Washington, D.C., nothing occurs in a vacuum; every action, or inaction, creates a ripple effect. A delay in funding the government and the Pentagon and lost time spent on an immigration bill that cannot secure enough GOP votes will bring the $4 trillion in tax increases closer to reality. This is how inaction can lower the outlook for industry—when lawmakers not only fail to act but fail to do so in a timely manner. 

Should Republicans choose to move two separate reconciliation bills that only require GOP votes, many in Washington expect the strategy to result in delayed tax legislation. By expending political capital and financial resources on an immigration measure, sources believe that fewer funds will remain available for the tax bill Congress must pass by December 31, 2025. Extending the entire 2017 tax bill, combined with Trump’s promises of more tax cuts on the campaign trail, exceeds $7 trillion in lost federal revenue over 10 yr. 

For example, were lawmakers to reinstate the ability to fully expense R&D activities and eliminate amortization for 2024, these two actions alone would create an $82.7 billion loss. Restoring 100% bonus depreciation for 2025 and preventing a drop to 40% generates $35.4 billion in red ink. More red ink will result from any spending on a border wall, guards and courts in an immigration bill that may move before taxes. 

The longer Congress goes into 2025 without moving a major tax bill, the less likely the final measure includes permanent provisions to provide manufacturers the stability they seek. Two separate reconciliation measures almost certainly will result in more temporary tax provisions for businesses. This would create a cloudy outlook as lawmakers would repeat this process of addressing expiring tax incentives and preventing rate increases on industry. 

The delays and infighting on Capitol Hill will lead President Trump to move ahead without Congress as quickly and decisively as legally possible. Legislating takes time, and the Trump administration is eager to generate wins early and often. Industry should watch closely for executive orders issued from the Oval Office in January and February, and for any new rules and regulations initiated in the spring to more permanently roll back much of President Biden’s environmental, economic and workplace agenda. 

Klotz is correct: Metalworking manufacturers must remain resilient in the face of economic uncertainty and will need to lean on that resilience in the coming months. They will need to have patience with the process of governing, and maintain realistic scenarios for possible outcomes from Washington, D.C. With trillions of dollars at stake in 2025, moves made in Washington weigh heavily on the industry’s outlook.

Industry-Related Terms: Case
View Glossary of Metalforming Terms

 

See also: Inside Beltway

Technologies: Management

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