Historical evidence and recent studies show that tariffs raise prices and reduce available quantities of goods and services for U.S. businesses and consumers, which results in lower income, reduced employment, and lower economic output. For example, the effects of higher steel prices, largely a result of the 2002 Bush steel tariffs, led to a loss of nearly 200,000 jobs in the steel-consuming sector, a loss larger than the total employment in the steel-producing sector at the time. It’s also worth noting that measures of trade flows, such as the trade balance, are accounting identities and should not be misunderstood to be indicators of economic health.
The Biden administration should provide relief to U.S. industries and workers by lifting the Trump tariffs, as they have failed in their objective to bring better trading practices and instead brought about economic damage. Further, the Biden administration should join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or sign bilateral trade agreements with other Asian-Pacific countries to continue to diversify U.S. supply chains, expand access to foreign markets, and promote U.S. economic growth. Learn more about Biden tariffs and trade proposals and explore our analysis of Trump trade war policies below.
If reelected, President Trump would drastically escalate the trade war he started during his first term. But what often goes unnoticed is President Biden’s role in continuing Trump’s first trade war. In fact, more tax revenue from the trade war tariffs has been collected under Biden than under Trump.
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The Trump administration imposed nearly $80 billion worth of new taxes on Americans by levying tariffs on thousands of products, amounting to one of the largest tax increases in decades. The Biden administration has so far kept most of the Trump administration tariffs in place.
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Former President Donald Trump’s proposed 10 percent tariff would raise taxes on American consumers by more than $300 billion a year—a tax increase rivaling the ones proposed by President Biden.
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While the U.S. tariffs were intended to protect American industries, they have largely hurt the U.S. economy. Rather than pass on the tariffs to Chinese consumers, analysis shows that most U.S. firms simply bore the costs.
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Policymakers actively marginalized the manufacturing sector by saddling them with cost recovery rules that prevent them from deducting the full cost of investment in physical plant and equipment. Going forward, policymakers should avoid haphazard fixes, targeted measures, and protectionism.
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As lawmakers today look for ways to boost American industry and reduce costs for consumers, they should pay attention to the mountains of evidence that the Trump-Biden tariffs have harmed American consumers and businesses.
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The bulk of economic evidence shows for most of the new tariffs imposed under the Trump administration, U.S. firms or consumers bore 100 percent, or even more, of the burden through lower profits or higher retail prices.
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As lawmakers today look for ways to boost American industry and reduce costs for consumers, they should pay attention to the mountains of evidence that the Trump-Biden tariffs have harmed American consumers and businesses.
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Of the many tax policies modeled in our new Options for Reforming America’s Tax Code 2.0, repealing the tariffs imposed under President Trump’s administration would be one of the simplest ways policymakers could boost economic growth.
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As countries move closer to agreement on how the OECD Pillar 1 Amount A will work and which companies will be impacted by it, it is incredibly important for policymakers to continue to evaluate not just the intended effects but also the potential unintended consequences.
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Get answers to some of the tax policy questions we hear most often from taxpayers, businesses, and journalists. Learn everything from the basics of who pays taxes and the difference between credits and deductions, to how taxes impact the economy and what constitutes sound tax policy. Discover additional resources to explore each question and topic in more depth.
Depending on your perspective, tariffs are either a great way to tax countries like China for their protectionist trade policies or they are a big reason why all those imported toys, clothing and holiday gifts cost more than you expected. You’ll learn what tariffs are, how they function, and how they can impact the domestic U.S. economy.
A multilateral solution to digital taxation would be preferable over DSTs and retaliatory measures, especially during these challenging economic times. DSTs are indeed distortionary taxes that can act as trade barriers. Retaliatory tariffs, however, only further weaken the U.S.-French trade relationship and will negatively impact both economies.
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Biden has not specified how he would approach the Trump tariffs, though his advisers have said he will at least review them.
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The difference that the OECD presents between the potential impact in the context of agreement compared to a harmful tax and trade war should show policymakers the value of continuing multilateral discussions.
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The OECD released blueprints for proposals on changing international tax rules alongside an impact assessment based on the overall design of the proposals. While the blueprints cover proposals both for changing where large multinationals owe corporate tax and designing a global minimum tax, there are still many unanswered questions. In the meantime, other digital tax proposals are moving forward and have the potential to result in a harmful tax and trade war.
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Broad themes of the president’s agenda include providing tax relief to individuals and tax credits to businesses that engage in desired activities, while the status of expiring TCJA provisions and tariffs seems uncertain.
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The USTR announced new tariffs in response to the French digital services tax of 25% on $1.3 billion worth of goods. The tariffs would apply to several make-up products, handbags, and assorted soaps.
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Digital services taxes effectively ring-fence the digital economy by limiting the tax to certain revenue streams of digital businesses, discriminating in favor of more traditional sectors of the economy.
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The U.S. Trade Representative (USTR) expanded its digital service tax investigations, announcing Section 301 investigations into digital tax policies in nine countries and the European Union. The announcement follows an investigation of the French digital services tax that was completed in 2019, after which the USTR threatened significant #tariffs in retaliation against France.
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Governments at all levels must work to remove the tax policy barriers that stand in the way of economic recovery and long-term prosperity following the COVID-19 crisis. Our new guide outlines several comprehensive options that policymakers can take at the federal and state levels.
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Identify some of the most common tax myths and tax policy misconceptions and learn how to separate fact from fiction. Discover why tax refunds shouldn’t be celebrated, why you should pay your income tax bill, and why certain deductions are wrongly labeled “loopholes,” among other useful facts. Improve your ability to counter misleading arguments about the tax code.
Instead of simply reaching for fiscal stimulus with the goal of increasing economic activity, tax policy changes can give vulnerable individuals and businesses additional liquidity and space to survive the reduction in economic activity needed in light of the coronavirus outbreak.
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