(Yicai) July 7 -- US President Donald Trump signed his flagship budget legislation into law on July 4, aiming to boost the economy through major tax cuts and increased spending. Dubbed the “One Big Beautiful Bill” by Trump, it opens up a clear divide between industries, favoring the traditional energy, defense, chip, and artificial intelligence sectors, while cutting support for green energy.

The legislation extends the Trump tax breaks enacted in 2017 for businesses and individuals, lowers the corporate tax rate, boosts military spending, and shrinks social security programs. Over the next decade, it will provide USD4 trillion in tax cuts and USD1.5 trillion in spending cuts.

The new law includes major tax incentives or financial support for semiconductor makers, energy companies, airlines, builders, and defense contractors, including additional incentives for chipmakers building plants in the United States. It also simplifies federal land drilling permits, lowers coal mining royalties to 7 percent from 12.5 percent, and provides tax credits for the cost of producing coking coal.

Meanwhile, the bill slashes subsidies for electric vehicles and tax credits for renewable-energy projects, and removes regulatory provisions on AI.

The traditional energy and defense industries look set to benefit, whereas the green energy sector may suffer, noted commentator Xu Guangyu. The legislation could help the US economic recovery, but its effectiveness remains uncertain and may push up Treasury yields, noted Huang Cendong, a strategist at Sinolink Securities Wealth Management Center.

The law favors tech giants, AI, and chip equipment suppliers, Citic Securities said. Regarding the energy sector, renewables face pressure, though energy storage policies have been softened, it noted, adding that the revival of the traditional energy sector is actively promoted, with opportunities in areas such as nuclear power.

The legislation also reshapes income distribution. The top 20 percent of households will see their income rise by 3 percent a year, or nearly USD13,000, according to a budget model developed by the University of Pennsylvania's Wharton School.

Middle-class households with annual income of USD53,000 to USD96,000 will get an increase of 1.8 percent, or USD1,430, according to the model, while the lowest-income groups on less than USD18,000 will see their after-tax income fall 1.1 percent, or USD165, after accounting for social security cuts.

Editor: Martin Kadiev