Former President Donald Trump’s affinity for tariffs has only grown since leaving office. As he seeks the Republican nomination for president once again, one of his central campaign promises is to implement a 10% across-the-board tariff on imported goods. Trump argues that this measure will safeguard American companies and workers against unfair foreign competition.
The issue of tariffs is what truly sets Trump apart from his fellow Republicans. While not fully embracing the idea, longtime GOP policy experts are beginning to come to terms with it and are considering how a new tariff regime could align with a broader pro-growth economic agenda.
A notable figure among these veterans of Republican policy circles is Trump’s economic advisor, Stephen Moore. Despite not personally favoring tariffs, Moore is attempting to find a silver lining. In a recent phone interview, he expressed, “One of the things that I’ve said to Trump is that if we have to implement tariffs, let’s incorporate them into a larger package that funds other initiatives, such as making his tax cuts permanent.”
Regardless of the election’s outcome in November, tax policy will be a top priority. Many provisions of Trump’s 2017 tax reform law are scheduled to expire starting at the end of 2025. Should Congress and the president fail to take action and extend these provisions, American households and businesses could face significant tax increases.
While Trump and other conservative figures have proposed further reductions in corporate tax rates, Moore believes that maintaining the current top corporate rate of 21%, established by the 2017 law, will be a contentious battle.
Tax Reform and Tariffs: Trump’s Plans for Small Businesses
President Trump has shown a keen interest in prioritizing tax reform for small businesses, should he be reelected for a second term. Stephen Moore, an economic adviser to the Trump campaign, has revealed that the President aims to make the 20% deduction on pass-through business income permanent, a move that would greatly benefit owners of small businesses.
However, the challenge lies in finding ways to fund these extended tax cuts. Trump has made it clear that he does not intend to cut Social Security or Medicare, both of which constitute significant portions of the federal budget. This leaves the question of where the necessary funds will come from.
One proposal put forward by Trump is the implementation of new tariffs on all imports at a rate of 10%. According to the Tax Foundation, this move could generate over $300 billion annually. The Trump campaign argues that these costs would be borne by foreign exporters rather than American consumers.
The additional revenue generated by these tariffs could potentially help finance the permanent tax cuts introduced in 2017. Moore believes that such tax cuts would not only encourage greater business investment and job creation but also offset some of the negative effects of tariffs, such as higher consumer prices.
While critics have raised concerns about potential trade wars sparked by these tariffs, Moore dismisses these worries, describing the tariffs as a form of “consumption tax” on imported goods. He emphasizes that other countries already impose similar taxes, such as value-added taxes (VAT), which ultimately raise the price of American exports. In his view, Trump is merely seeking to level the playing field.
In summary, should Trump secure a second term, his focus on tax reform for small businesses and the possibility of making the pass-through deduction permanent may have significant implications for owners of small businesses. However, funding these tax cuts remains a challenge, and the proposed tariffs on imports could serve as a potential solution. Ultimately, the aim is to stimulate business investment and offset the impacts of tariffs while also addressing existing imbalances in international trade.