Citi names key beneficiary of Trump's 'big and beautiful' law

The "big and beautiful" tax law signed by US President Donald Trump last week should have a positive impact on the stock prices of construction and industrial machinery manufacturers, Citibank said. In its opinion, the main beneficiary of Trump's tax policy should be machinery giant Caterpillar. 

"We view Caterpillar stock (...) as the primary beneficiary of the [new] law's effect, as the combination of U.S. tax reform, additional government infrastructure funding, incentives for domestic manufacturing and R&D, and the 100 percent bonus depreciation provision support demand for construction equipment," quoted by CNBC in a July 8 note published by Citi Research analyst Kyle Menges. The latter - suggesting that buyers of U.S. industrial machinery can write off the entire amount of capex all at once, which reduces taxable income in the year of purchase.

The analyst said the reduction in tax credits for clean energy makes Caterpillar's traditional solutions - large diesel and gas engines and turbines - more favorable compared to green alternatives. As a manufacturer of heavy construction equipment, Caterpillar could benefit from the multibillion-dollar infrastructure spending mandated by the new law - to build a wall on the border with Mexico, migrant detention centers and defense facilities, Menges added.

At the same time, short-term demand growth prospects are limited due to high interest rates and continued uncertainty over future duties, the analyst warned.

Caterpillar quotations have grown by 8.4% since the beginning of 2025. Wall Street is generally positive about the company's securities: Half of the 28 stock analysts tracking their dynamics, advise to buy these shares (ratings Buy and Overweight). The remaining 14 - recommend to keep positions on Caterpillar in the investment portfolio (rating Hold). At that, the average target price of the shares is about $376.5, which provides for possible decrease of quotations by about 4.5%.

Trump's tax reform also promises notable gains for defense contractors and local manufacturers. An expected increase in government spending on defense and border security back in early summer increased investor interest in RTX and General Dynamics shares, and quotes for the iShares US Aerospace & Defense industry exchange-traded fund rose to all-time highs. U.S. manufacturers doing business in the U.S. are also on the plus side - for them introducing accelerated depreciation, R&D tax credits and tax breaks on interest expense on borrowing. Among the potential beneficiaries are Alliant Energy, Ameren and American Electric Power. The law also benefits fossil fuel producers, telecom operators, space companies and auto dealers.

Проигравшими от налоговой политики Трампа могут стать компании из секторов возобновляемой энергетики, здравоохранения и недвижимости. The elimination of incentives for clean energy producers took First Solar, Enphase and Sunrun into the red quotations. Tesla, General Motors and other auto brands will be hit by the elimination of tax credits for buying electric cars. The law includes significant funding cuts to the Medicaid program - which increases pressure on shares of insurers CVS, Humana, UnitedHealth, Elevance and Cigna. High interest rates, likely with a widening budget deficit, pose additional risks to the real estate market: the profitability of real estate developers and investment trusts such as SBA Communications, Equinix and Alexandria Real Estate is at risk.

This article was AI-translated and verified by a human editor