The ‘One Big Beautiful Bill’ sparks logistics sector reflection amid a mixed economic outlook

While the outcome of the federal budget reconciliation bill, also known as the “One Big Beautiful Bill (OBBB),” was largely expected to be passed along party lines, as was the case last month, what is less definitive about the bill is its potential impact on freight transportation and logistics operations.

That is not to say there are no indications of what may be in store, to be sure. That was made clear in a research note issued by investment firm Baird Equity Research, which highlighted various aspects of the bill, including: the full out expensing of capital investment; restoration of 100% bonus depreciation, up from the current 40% phase-out level, expansion of interest deductibility measures from 30% of EBIT to 30% of EBITDA; an increases in the SALT (state and local tax), from $10,000 to $40,000 through 2029); the elimination of federal income tax on tips and overtime wages; a permanent increase in the child tax credit, from $2,000 to $4,000; an expansion in the standard deduction and a new $6,000 above-the-line senior deduction; and the deductibility of interest on new car loans through 2028 for U.S.-assembled vehicles.

From a high level, the firm was supportive of the OBBB.

“We view this signature piece of legislation as highly supportive of freight fundamentals, particularly as the full range of tax and investment incentive takes effect beginning in 2026,” noted Baird.

Given the breadth and scope of what is included in the bill, makes assessing the impacts of the OBBB on freight transportation and logistics a somewhat complicated question to answer, according to Paul Bingham, Director, Transportation Consulting, for S&P Global Market Intelligence.

As an example, Bingham explained that the impacts on freight demand implied by the tax policy changes alone are complicated by the need to understand the macroeconomic and workforce implications, as well as microeconomic impacts on specific industries. (e.g. auto sales and auto parts demand impacts of the new $10,000 personal income tax credit for purchase of U.S.-made vehicles.)

And he observed that there will be increased industry investment activity, due to the corporate investment tax credit policy changes as well.

“The increased expenditures for border security and immigration enforcement may affect the labor supply for the construction industry, a source of demand for transportation of building materials, furnishing and fixtures,” said Bingham. “There are also implications for demand from agriculture, also affected by the labor supply, where reduced production results in less transportation demand. The macroeconomic impacts of the higher U.S. government expenditures with lower tax collections from the OBBB may result in market pressures for higher interest rates. Those higher interest rates translate into higher costs of capital for business, lower investment and perhaps higher inflation expectations than would have been the case without the OBBB. Those result in economic performance below potential for the economy and thus weaker demand for freight than before the bill’s adoption.”

What’s more, this bill was passed at a time of economic uncertainty, with much of it driven by the White House’s tariffs and trade policies, as well as inflation and a general sense of caution being exercised by companies, among other factors.

Those things are being exacerbated by the economy trending towards a recession—regardless of actions taken by the White House, according to Walter Kemmsies, president of The Kemmsies Group, a provider of industrial and logistics real estate brokerage and consulting services.

“Based on what the bond market is saying, as the yield curve un-inverts, we get closer to when a garden variety recession would occur,” said Kemmsies. “We are talking about a recession that even the Fed might engineer a bit to help control inflation, but then as soon as it is controlled, stimulate the economy and help to get it out of the doldrums. A lot of economists are saying there is a 60%-plus chance there will be a recession in 2026 and that this budget bill has nothing in it to prevent that.”

But the good news, he said, is that the OBBB does provide benefits for supply chain stakeholders to start preparing for the fixes, or changes, they need, in the form of future-proofing their supply chains, through the bill’s capital expenditure tax write offs, which they should use as soon as they can once the bill takes effect. These steps can be taken to make improvements for things like supply chain diversification and also supply chain resilience.

In the weeks leading up to the Congressional OBBB vote, there was a lack of certainty, in terms of if it would be passed. It was passed, of course, in an ongoing period of economic uncertainty. Which makes what happens from here, for future economic throughput and supply chain output, a very compelling story.