The best way to lower some taxes is to raise others. That is the idea that US President Donald Trump has indicated that he is behind a new tariff ad. As he said at a meeting with Japanese Prime Minister, Shigeru Ishiba, Trump plans to put new tariffs on imports from other countries next week, with the aim of compensating the tax drops that his party studies.
The president’s idea would be to impose reciprocal tariffs on countries that already impose their own rates on US importsto achieve a “fair treatment.” Initially he had talked about approving them this Friday, but he postponed them after seeing the negative reaction of the markets, which increased their falls after the announcement.
Trump had promised in the campaign approve of these reciprocal tariffs, arguing that these countries would have to “withdraw them or pay us hundreds of billions of dollars, with which the US would make an absolute fortune.” The problem is that Many countries, starting with the EU, charge lower average tariffs for US imports than vice versaso a reciprocal tariff in those cases would imply that the United States would lower its own.
The second problem is that, contrary to what Trump constantly repeats, tariffs are not a tax paid by foreign countries, but only American consumers themselves. In other words, Putting tariffs to other countries actually means raising taxes to their own citizenssomething that is a taboo in the Republican party and that does not make any grace to the markets or many conservative commentators.
But Trump has an idea: as Reuters reports, the president explained to his deputies at a previous meeting that tariffs would allow them to square a permanent tax reform. According to the US law, tax drop or expense increases that are not compensated with new taxes expire at 10 years. So, The tax decrease that Trump approved in 2017 will disappear in 2 yearsand anyone who approves this year will only last until 2035.
Trump’s plan is Compensate the sales to the personal income tax or the societies tax with tariff increases: upload some taxes to be able to lower others. And in addition, since Trump is convinced that tariffs are paid by foreign countries, the result would be wonderful: to raise taxes to people from other countries to be able to lower them to Americans. Of course, things do not work, but it is what the president seems to believe and what he has repeated for years.
The president of the Congress, Mike Johnson, has advanced that they will publish their tax reform plan this weekend. The key question is whether they will count tariff income or if they prefer to avoid tax war. Trump, of course, seems willing to continue with her.
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