1. Introduction
Donald Trump’s return to the presidency of the United States in January 2025 was marked by significant changes in American trade and tax policies. Continuing its protectionist approach, the Trump administration has implemented a series of sweeping tariff measures that have profoundly impacted global trade. This article analyzes Trump’s new tariff policy, its effects on the international stage, the specific implications for Brazil and the consequences for the American tax system and international tax planning.
Trump’s New Tariff Policy (2025)
2.1 General Structure of the New Tariffs
On April 2, 2025, President Trump announced an unprecedented tariff policy through a Presidential Memorandum entitled “Reciprocal Trade and Tariffs”. This new policy established a base tariff of 10% on virtually all imports into the United States, effective April 5, 2025. In addition, additional, country-specific tariffs were imposed based on the US trade deficit with each nation, creating a system that Trump called “reciprocal tariffs”.
The official justification for these measures is to protect American competitiveness, strengthen national sovereignty and increase the country’s economic security. Trump declared a state of national emergency to implement these tariffs, using his authority under the International Emergency Economic Powers Act (IEEPA).
2.2 Recent Developments (until April 29, 2025)
In a significant turnaround, on April 9, 2025, Trump announced a 90-day pause in the implementation of country-specific tariffs for 75 trading partners, while maintaining the universal 10% tariff. However, he raised tariffs on Chinese products to 145%, significantly intensifying the trade war with China.
This decision appears to have been motivated by financial market pressures and wider economic concerns. The international response to Trump’s tariffs has been one of widespread repudiation, with several countries announcing retaliatory measures and challenging the tariffs at the World Trade Organization (WTO).
3. International Impact
3.1 Effects on the Global Economy
The implementation of Trump’s tariffs has created shockwaves throughout the global economy. Economic analysts estimate that these measures could:
- Significantly increase the cost of living for American consumers, with companies such as Shein, Target, Ford and Walmart announcing price increases due to the tariffs.
- Provoke retaliation from trading partners, creating a cascade effect of global protectionism.
- Destabilize global supply chains, forcing multinational companies to reconsider their production and distribution strategies.
- Increase the risk of global recession due to the contraction of international trade.
3.2 International response
The international response to Trump’s tariffs has been one of widespread repudiation. On April 4, 2025, China’s Ministry of Finance announced that it would match Trump’s new tariffs on Chinese goods with its own tariffs on American goods. European, Asian and Latin American leaders have denounced the tariffs as a violation of free trade principles and a threat to the multilateral trading system. The WTO is being brought in by several countries to challenge the legality of the US measures.
4. Impact of Trump’s New Tariff Policy on Brazil
4.1 Direct Economic Effects for Brazil
Brazil was included in the imposition of the 10% base tariff on its exports to the United States. This measure directly affects key sectors of the Brazilian economy:
- The Brazilian aerospace sector, represented mainly by Embraer, faces greater complexity and additional costs for its jet exports to the US market.
- The 25% tariffs on automobiles and their components affect more than US$1.6 billion in Brazilian exports, mainly in auto parts.
- The Brazilian steel sector, which had already negotiated exemptions during Trump’s first term, now faces tariffs of 25% on steel and 10% on aluminum.
Interestingly, some economists suggest that Brazil could emerge as a relative winner in this global trade war, as the tariffs imposed on the country are lighter than those applied to other important US trading partners, such as China.
4.2 Brazilian response
Brazilian President Luiz Inácio Lula da Silva harshly criticized the US tariffs, calling them “arbitrary” and stating that Trump’s tariff policy “won’t work”. The Brazilian government has announced plans to challenge the steel tariffs at the WTO. At the same time, Brazil has sought to strengthen trade ties with other countries, particularly Mexico and Asian nations, as a strategy to diversify its trading partners in the face of tensions with the US.
Lula has urged a calm and balanced response, emphasizing the importance of negotiations before retaliatory measures. At a meeting of Latin American leaders on April 9, 2025, he stressed the need for regional unity in the face of US protectionist policies.
5. Impact on the US Corporate Tax System
5.1 The Future of the Tax Cuts and Jobs Act (TCJA)
Corporate tax policy in the US is at a critical juncture in 2025, with many important provisions of the 2017 Tax Cuts and Jobs Act (TCJA) set to expire at the end of the year. The Trump administration has been articulating plans to extend and modify these provisions, with significant implications for US companies and multinationals.
According to estimates, extending most of the TCJA’s provisions would reduce federal tax revenue by approximately $4.5 trillion between 2025 and 2034. The Trump administration argues that these extensions are necessary to maintain the competitiveness of American companies and stimulate long-term economic growth.
5.2 Proposed Corporate Tax Reforms
Among the Trump administration’s main proposals for corporate tax reform are:
- Reducing the corporate tax rate from 21% to 15%, which would represent an estimated cost of around $300 billion to public coffers.
- Maintaining deductions and effective rates on GILTI (Global Intangible Low-Taxed Income) and FDII (Foreign-Derived Intangible Income) at current levels, rather than allowing them to increase as scheduled for 2026.
- Implementation of additional tax incentives for companies that “repatriate” manufacturing operations to the United States.
6. International Tax Planning with Trump’s New Tariff Policy
6.1 Rejection of the OECD Global Tax Agreement
On January 20, 2025, President Trump issued a presidential memorandum declaring that the OECD’s global tax agreement, known as “Pillar Two”, “has no force or effect in the United States” unless it is formally adopted by Congress. This agreement, which aimed to establish a global minimum tax rate of 15% on corporate profits, was signed by around 140 countries, including the US during the Biden administration. Trump’s decision to withdraw from the agreement was justified as a measure to protect US economic sovereignty and prevent American companies from being subject to foreign tax regimes considered discriminatory.
In addition, the memorandum instructed the Secretary of the Treasury to identify countries with tax regimes that could disproportionately affect U.S. companies and to recommend protective measures, including possible retaliatory tariffs or the application of Section 891 of the Internal Revenue Code, which allows doubling tax rates on companies and individuals from countries considered discriminatory.
6.2 Implications for GILTI and FDII
The GILTI (Global Intangible Low-Taxed Income) and FDII (Foreign-Derived Intangible Income) policies introduced by the 2017 TCJA are crucial elements of international tax planning for U.S. companies:
- GILTI: Currently, American companies receive a 50% deduction on GILTI income, resulting in an effective tax rate of 10.5%. Without legislative action, this deduction will drop to 37.5% after 2025, increasing the effective tax rate to 13.125%. The Trump administration plans to maintain current deduction levels.
- FDII: Similar to GILTI, the deduction for FDII is scheduled to decrease from 37.5% to 21.875% after 2025, increasing the effective tax rate from 13.125% to 16.406%. The Trump administration also plans to maintain current FDII deduction levels.
These policies have significant implications for the international tax planning of US companies, affecting decisions about the location of intellectual property, the structuring of global operations and profit repatriation strategies.
6.3 Potential International Conflicts
The rejection of the OECD global tax agreement by the US and the tax policies proposed by the Trump administration could lead to significant conflicts with other countries:
- Possible retaliatory measures by European countries and other nations pursuing the implementation of the OECD agreement.
- Increased risk of double taxation for US multinational companies operating in jurisdictions that implement their own versions of global minimum taxes.
- The OECD said it will continue to work with the US and all countries “at the table” to support international cooperation that promotes certainty, avoids double taxation and supports economic growth.
7. Conclusion
Trump’s new tariff policy, combined with his approaches to corporate taxation and international tax planning, represents a fundamental shift in the position of the United States in the global economy. “Reciprocal” tariffs and the rejection of multilateral tax agreements signal a clear preference for unilateral and protectionist approaches to international economic relations.
For Brazil, these changes present both challenges and opportunities. Although Brazilian exports face new obstacles in the US market, the country may find relative advantages compared to more severely affected competitors, such as China.
In the realm of corporate taxation and international tax planning, Trump’s policies clearly favor American companies through lower tax rates and the continuation of favorable tax regimes for international income. However, these policies also create uncertainty and possible conflicts in the international tax system.
As these policies continue to evolve, companies, governments and economic actors around the world will need to adapt their strategies to this new environment characterized by greater trade protectionism and international tax competition.
Written by Isar Galbinski, Tax Planning Consultant at Drummond Advisors