top of page
Logo Wise Finance World

Trump's Return: How His Tax and Tariff Policies Are Shaping the Global Economy

Trump

Since his return to the White House in January 2025, President Donald Trump has aggressively pursued a series of tax and tariff policies aimed at reshaping the U.S. economy and its global trade relationships. Building on the foundation of his first-term Tax Cuts and Jobs Act (TCJA), Trump’s current policies focus on extending tax cuts, imposing new tariffs, and reducing government spending. These measures have sparked significant debate about their economic implications, both domestically and internationally. This article examines Trump’s current tax and tariff policies, their immediate effects, and their broader economic impact.



Extension and Expansion of the Tax Cuts and Jobs Act (TCJA)


One of Trump’s top priorities has been the extension of the TCJA, which is set to expire at the end of 2025. The TCJA, enacted in 2017, significantly reduced corporate and individual tax rates, doubled the standard deduction, and introduced a 20% deduction for pass-through businesses. Extending these provisions is estimated to cost $4.6 trillion over a decade, raising concerns about the federal deficit, which already exceeds $4.6 trillion and is expected to surpass $35 trillion.

In addition to extending the TCJA, Trump has proposed several other tax cuts, including:

  • Reducing the corporate tax rate from 21% to 15% to incentivize domestic manufacturing.

  • Eliminating taxes on tips, overtime pay, and Social Security benefits to provide relief to workers and retirees.

  • Repealing the $10,000 cap on state and local tax (SALT) deductions, a move that would benefit high-income taxpayers in high-tax states.

While these measures aim to stimulate economic growth, critics argue that they disproportionately benefit corporations and wealthy individuals, potentially exacerbating income inequality.



Trump's Tariffs and Trade Policies


Trump’s trade policies have been a hallmark of his presidency, and his second term is no exception. In early 2025, he reinstated a 25% tariff on steel and aluminum imports, targeting key trading partners like Canada, Mexico, and the European Union. These tariffs aim to protect domestic industries but have drawn criticism for increasing costs for downstream manufacturers and consumers.

Additionally, Trump has proposed a 10% across-the-board tariff on all imports and a 60% tariff on Chinese goods. While these measures are intended to reduce trade deficits and reshore supply chains, economists warn that they could lead to higher inflation and retaliatory measures from trading partners.

The impact of these tariffs is already being felt. For example, U.S. steel producers have raised prices, squeezing profit margins for manufacturers reliant on imported materials. Meanwhile, global trade tensions have escalated, with the EU threatening countermeasures on American products like bourbon and jeans.



Deficit and Fiscal Challenges


Trump’s tax and tariff policies are expected to significantly increase the federal deficit. The Committee for a Responsible Federal Budget estimates that his fiscal plans could add $7.75 trillion to the national debt over the next decade.

To offset these costs, Trump has proposed cuts to government spending, including reductions in renewable energy subsidies and IRS funding. However, these measures are unlikely to fully compensate for the revenue losses from tax cuts and tariffs.



Global Implications


Trump’s policies have also had far-reaching effects on the global economy. His decision to withdraw from the OECD’s global minimum tax agreement, which aimed to curb tax avoidance by multinational corporations, has undermined international efforts to create a fairer tax system.

Moreover, his aggressive tariff policies have strained relationships with key allies and disrupted global supply chains. For instance, the 25% steel and aluminum tariffs have led to higher costs for European manufacturers and increased tensions with trading partners.



Economic Impact on the United States


Domestically, Trump’s policies have had mixed results. While tax cuts and deregulation have boosted corporate profits and stock market performance, the benefits have not been evenly distributed. Small businesses and low-income households have faced challenges due to rising costs and reduced government support.

The reinstatement of tariffs has also led to inflationary pressures, with downstream manufacturers passing higher costs onto consumers. This has raised concerns about the long-term sustainability of Trump’s economic policies.



Sources:


Comments

bottom of page