This isn’t a return to normal transatlantic trade. The EU is reducing tariffs now to stabilize trade without assuming U.S. policy consistency. Trade policy remains a key geopolitical risk.

What This Means

The EU decision to adopt the deal with safeguards reflects a broader shift in European trade policy: preserve access to the U.S. market where possible, but hedge against renewed tariff coercion.

EU lawmakers are looking to provide more certainty for European businesses, while building in mechanisms to suspend or unwind tariff concessions if the United States fails to comply.

What Happened

The European Parliament voted 417-154, with 71 abstentions, on March 26, 2026 to advance legislation implementing tariff commitments under the U.S.-EU trade deal reached in Turnberry, Scotland in July 2025. The deal is based on an underlying 2025 framework.

What’s in the deal

• EU to eliminate most tariffs on U.S. industrial goods

• Expanded access for some U.S. agriculture

• Continued zero tariffs on U.S. lobster

• U.S. keeps a 15% tariff ceiling on most EU exports

Parliament added a suspension clause, a “sunrise” clause making EU tariff cuts conditional on U.S. compliance, and a sunset clause that would end the concessions on March 31, 2028.

EU lawmakers do not fully trust the deal. Lawmakers added:

• Suspension clause so EU can pause concessions if the U.S. escalates

• “Sunrise” clause to tariff cuts apply only if the U.S. complies

• Sunset clause (2028) in which deal expires without renewal

Trigger: U.S. tariffs imposed after the original agreement (e.g., metals content rules).

Key Trade Facts

• The U.S. and EU together account for almost one-third of global trade;

• EU exports to U.S. hit €555B in 2025;

• U.S. was EU’s largest trading partner in 2025.

Why This Matters for Companies

For companies with transatlantic supply chains, the agreement may preserve market access while keeping tariff risk elevated as a continuing strategic variable.

Exporters in industrial goods, agriculture, seafood, and sectors exposed to metals-content rules should treat the deal as a stabilizer, not a full normalization.

The EU’s insistence on conditionality signals that trade policy will remain tightly linked to broader geopolitical disputes and to future U.S. tariff actions.

Broader Policy Context

The vote lowers the probability of an immediate U.S.-EU tariff spiral, but it does not restore traditional trade stability.

The EU is hedging by simultaneously pursuing diversification beyond the U.S.

The EU approved the U.S. trade deal because the economic cost of renewed tariff escalation was too high, but it did so on a trust-but-verify basis.

The EU is also expanding trade architecture with other like-minded partners. The EU and CPTPP countries agreed on March 27, 2026 move forward on a possible digital trade agreement covering areas such as e-commerce, data flows, and data storage.

What Companies Should Do

Companies should treat this as managed risk — not resolution.

• Reprice exposure using 15% tariff baseline

• Build downside scenarios for snapback tariffs

• Reevaluate supply chains (especially metals-linked goods)

• Monitor policy as a board-level issue

The move follows the Supreme Court’s decision that the International Emergency Economic Powers Act (IEEPA) does not authorize the president to impose tariffs, even during a declared national emergency. Section 122 allows the president to impose temporary import surcharges of up to 15% for a maximum of 150 days when the United States faces significant balance-of-payments deficits.

What This Means

The new import surcharge represents a shift toward statutory trade authorities rather than emergency economic powers.

Key implications include:

• The administration is replacing invalidated IEEPA tariffs with a temporary tariff under Section 122.

• The new tariff is time-limited and capped by statute, unlike the open-ended tariffs attempted under emergency powers.

• The surcharge may serve as a short-term bridge policy while the administration considers longer-term tariffs under other authorities such as Section 301 or Section 232.

What Happened

The administration previously imposed tariffs under the International Emergency Economic Powers Act (IEEPA) as part of its broader trade policy. Businesses and trade groups challenged those tariffs in court.

After the Supreme Court ruled that IEEPA does not authorize the president to impose tariffs, the administration responded by issuing a presidential proclamation imposing a temporary import surcharge under Section 122 of the Trade Act of 1974.

Under the statute:

• The tariff can reach up to 15%

• It can remain in place for up to 150 days without congressional approval

• Congress may authorize additional measures if necessary

Why This Matters for Companies

• A new tariff regime is now in effect: The new surcharge increases the cost of imported goods across many sectors, affecting manufacturers, retailers, and companies with global supply chains.

• Trade policy volatility remains high: Although the Supreme Court limited emergency tariff authority, the administration still has several statutory tools available, including:

  • Section 122 balance-of-payments tariffs

  • Section 232 national security tariffs

  • Section 301 tariffs targeting unfair trade practices

• Temporary tariffs may lead to longer-term measures: Section 122 tariffs are often used as short-term policy tools, potentially followed by longer investigations or new trade actions.

Macro Impact

• Trade policy escalation: The new surcharge effectively raises U.S. tariff levels across many imports and may prompt retaliation from trading partners.

• Balance-of-payments framing: The administration’s use of Section 122 reflects renewed emphasis on international payments imbalances and trade deficits, as described in the White House proclamation establishing the import surcharge.

• Institutional shift: Following the Supreme Court ruling on IEEPA tariffs, the administration has moved toward traditional statutory trade authorities, which involve procedural limits and congressional oversight.

What Companies Should Do

• Monitor the 150-day tariff window: Companies should track whether Congress extends the measure or whether the administration transitions to other tariffs.

• Evaluate import exposure: Businesses should analyze tariff exposure by product category and supplier country.

• Prepare for additional trade actions: Further tariffs could emerge under Section 301 or Section 232 authorities.

• Strengthen trade policy monitoring: Rapid changes in legal authorities and trade policy tools make proactive monitoring critical.

Key Takeaway

The administration’s decision to impose a temporary import surcharge under Section 122 marks the next phase of U.S. tariff policy following the Supreme Court’s rejection of tariffs imposed under IEEPA.

Although the new tariff authority is limited to 15% and 150 days without congressional approval, it signals that tariffs remain a central tool of U.S. economic policy and that additional trade actions are likely.

The decision significantly narrows the scope of emergency economic powers and reaffirms that Congress — not the president — controls tariff policy under the Constitution.

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What this means

Trade policy shifts are now more likely to occur through congressional legislation or existing trade statutes rather than through executive emergency action.

What Happened

In 2025, the Trump administration imposed broad tariffs after declaring national emergencies tied to drug trafficking and persistent U.S. trade deficits. Authority for the tariffs relied on IEEPA, a 1977 statute historically used for sanctions and financial restrictions.

The tariffs included:

• 25% tariffs on imports from Canada and Mexico

• 10%–20% tariffs on Chinese imports

• 10% baseline tariff on imports from most countries

Several small businesses challenged the tariffs, arguing that IEEPA authorizes regulation of economic transactions during emergencies but does not authorize taxes such as tariffs. Lower courts agreed, and the Supreme Court affirmed that interpretation.

The Court’s key finding:

Tariffs are taxes, and the Constitution assigns taxing power to Congress under Article I. The president cannot impose tariffs unless Congress clearly grants that authority.

Why the Court Ruled This Way

1. Tariffs are taxes: The Constitution gives Congress the power to “lay and collect Duties, Imposts and Excises.” The Court held that tariffs fall squarely within that authority.

2. IEEPA does not mention tariffs: IEEPA allows presidents to block or regulate financial transactions during national emergencies but does not refer to tariffs or duties.

3. Major questions doctrine: The Court also applied the major questions doctrine, which requires clear congressional authorization for executive actions with major economic consequences. Allowing a president to impose unlimited tariffs under emergency powers would represent a major expansion of executive authority.

Why This Matters for Companies

1. Trade policy becomes more predictable

Emergency tariffs — potentially imposed overnight — now face legal limits. Companies can expect tariff changes to occur through established legal channels rather than through emergency declarations.

2. Congress becomes more important

The decision pushes tariff policy back toward:

• Congressional legislation

• Formal trade investigations

• Statutory trade authorities

Examples of statutory trade authorities include:

• Section 232 national security tariffs

• Section 301 trade enforcement actions

• Section 122 of the 1974 Trade Act for balance-of-payments issues.

These processes typically involve investigations and notice periods.

3. Supply-chain planning risk declines

Manufacturers, distributors, and retailers that rely on imports gain greater stability. The ruling reduces the likelihood that companies will face sudden tariff shocks triggered by emergency declarations.

The Macro Impact

1. Reinforces separation of powers. The ruling strengthens congressional authority over trade and limits executive economic powers.

2. Reshapes U.S. trade strategy. Future administrations may rely more heavily on sanctions, export controls, investment restrictions, and trade investigations rather than emergency tariffs.

3. Signals stability to trading partners. Foreign governments may view U.S. tariff policy as more predictable because it now depends more on legislation and formal trade processes.

What Companies Should Do

1. Monitor other executive trade tools. The ruling does not limit other executive trade authorities, including:

• Section 232 tariffs

• Section 301 trade actions

• Section 122 of the 1974 Trade Act

• Export controls

• Economic sanctions

2. Reassess tariff risk models. Companies should revisit supply-chain risk scenarios that assumed emergency tariff authority.

3. Strengthen policy monitoring. Trade policy risk is shifting toward legislative negotiations and formal trade investigations, which require earlier engagement from companies.

Key Takeaway

The Supreme Court’s decision in Learning Resources v. Trump narrows the scope of presidential emergency economic powers and restores Congress as the primary decision-maker on tariffs.

For businesses, the ruling reduces the likelihood of sudden tariff shocks — but trade policy risks remain through existing statutory trade tools and potential congressional action.

What Happened

Carney outlined a new policy doctrine for Canada and similarly positioned economies in a keynote address at the World Economic Forum in Davos on January 20, 2026. The address came in response to rising tariffs and protectionism, the expanded use of industrial policy and subsidies, and increasing use of trade and energy as geopolitical tools. Key points:

• The rules-based system is “less predictable and more fragile,” according to Carney.

• Trade, energy, and finance are increasingly used as instruments of geopolitical leverage.

• Middle powers represent a large share of global GDP and trade, but remain structurally exposed to major power decisions.

• Carney calls for diversification of trade and supply chains to reduce dependency risks.

Core Framework: “Principled Pragmatism”

Carney’s strategy rests on two pillars:

Strength at home: Countries should invest in

• Clean energy and critical minerals

• Advanced technology (AI, digital infrastructure)

• Defense and economic security capacity

Countries should reduce reliance on single trading partners or fragile supply chains.

Flexible External Partnerships: Countries should move beyond rigid multilateralism toward issue-based coalitions. They should build partnerships with aligned economies on trade, climate, and security. They should embrace “variable geometry” alliances rather than fixed blocs.

What This Means

• End of predictability: Companies and governments should assume continued volatility in trade and regulatory regimes.

• Geoeconomics dominates: Economic policy is now a primary tool of national security strategy.

• Fragmentation risk: Supply chains will increasingly align along political and security lines, not just cost efficiency.

Why This Matters for Companies

• Trade volatility: Tariffs, export controls, and supply chain fragmentation likely to increase.

• Supply chain redesign: Pressure to regionalize or “friend-shore” operations.

• Localization pressure: Governments may require domestic production in strategic sectors.

• Policy risk: Regulatory frameworks may shift toward national security priorities.

• Regulatory complexity: Diverging standards across jurisdictions.

• New opportunities: Investment in energy transition, AI, and infrastructure will accelerate.

What Companies Should Do

• Re-map supply chains by geopolitical risk: Identify single-country dependencies (particularly in critical inputs) and develop alternative sourcing strategies across allied jurisdictions.

• Build policy intelligence into strategy: Monitor trade, industrial policy, and national security developments as core business inputs—not externalities.

• Localize where necessary: Evaluate when domestic production or regional hubs are required to maintain market access or qualify for incentives.

• Align with government priorities: Position investments around sectors receiving policy support (e.g., clean energy, critical minerals, semiconductors, AI).

• Stress-test market access: Model scenarios involving tariffs, export controls, or sanctions to assess revenue and operational exposure.

• Engage in coalition markets: Prioritize expansion in jurisdictions participating in aligned trade or regulatory blocs.

• Enhance compliance infrastructure: Prepare for more complex and divergent regulatory regimes across markets.

• Capitalize on public funding: Leverage subsidies, tax credits, and public-private partnerships tied to industrial policy initiatives.

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The Framework Agreement is intended as a first step in a process that could expand to cover additional areas and “continue to improve market access and increase their trade and investment relationship.”

The United States and the EU reached the agreement in July 2025, avoiding President Donald Trump’s threatened 30% tariffs. The agreement raised concerns in Europe about economic damage, political fallout, and the durability of the deal. (see U.S. and EU Reach Trade Agreement)

Key Details

• Tariff Reductions:

  • The EU “intends” to eliminate tariffs on all U.S. industrial goods and expand preferential access for US agriculture and seafood.

  • The U.S. will commit to limit tariffs on EU industrial goods at 15%, with MFN-only tariffs applied to key sectors such as aircraft, pharmaceuticals, and natural resources.

  • The U.S. commits to conditional reduction of Section 232 tariffs on EU automobiles and parts upon EU legislative implementation.

• Energy & Technology:

  • The EU commits to purchase $750 billion of U.S. liquified natural gas, oil, and nuclear energy products by 2028.

  • The EU “intends” to purchase $40 billion in U.S. artificial intelligence (AI) chips for computing infrastructure.

• Investment:

  • EU firms are expected to invest $600 billion in strategic U.S. sectors through 2028.

• Defense:

  • The EU plans to substantially increase procurement of U.S. defense equipment, reinforcing NATO interoperability.

• Regulatory Cooperation:

  • The is mutual recognition of automotive standards and expanded conformity assessments across sectors.

  • The EU notes U.S. concerns related to the Carbon Border Adjustment Mechanism (CBAM), Corporate Sustainability Due Diligence Directive (CSDDD), and Corporate Sustainability Reporting Directive (CSRD).

  • The EU will ease compliance burdens for U.S. exporters, especially for small and medium-sized businesses.

• Digital Trade:

  • The EU confirms it will not impose network usage fees.

  • Both sides reaffirm the WTO moratorium on customs duties for electronic transmissions.

Key Changes

• Eliminates the “5% safe harbor” for the Section 45Y clean electricity production tax credit (PTC) and the Section 48E investment tax credit (ITC) for all wind projects and for solar projects of more than 1.5 megawatts (MW).

• Leaves in place the tougher “physical work” test, which considers the amount of work done on a project.

• Implements strict continuity rules.

Guidance Determines 2027 Deadline

OBBB repealed the PTC and ITC for wind and solar projects unless they are placed in service by the end of 2027. In July, President Trump issued an executive order titled “Ending Market Distorting Subsidies for Unreliable, Foreign-Controlled Energy Sources,” which directed the Treasury to issue guidance to determine whether a project began or is subject to the December 31, 2027 deadline.

• Began construction after July 4, 2026: Wind and solar projects that have not started construction by July 4, 2026 must be in service by the end of 2027 to qualify for the tax credits.

• Began construction by July 4, 2026: Wind and solar projects that began construction before July 4, 2026 can be placed in service after 2027.

“Physical Work” Replaces 5% Safe Harbor

• Under the 5% safe harbor, a project begins construction when the taxpayer pays or incurs 5% or more of the total cost of the facility.

• Now, a developer must have performed “physical work of a significant nature,” which is determined under a “facts-and-circumstances” approach.

Types of “Physical Work”

Both off-site and onsite work can be used to demonstrate that physical work of a significant nature has begun. Qualifying work includes:

• Off-site work may include the manufacture of components, mounting equipment, support structures such as racks and rails, inverters, and transformers and other power conditioning equipment;

• On-site work for wind projects may include such activities as the excavation for the foundation, the setting of anchor bolts into the ground, or the pouring of the concrete pads of the foundation. On-site work for solar projects may include the installation of racks or other structures to affix photovoltaic (PV) panels, collectors, or solar cells to a site.

• Physical work of a significant nature does not include preliminary activities, including planning, designing, permitting, site clearing, financing, and warehousing.

September 2, 2025 Deadline

• Given that the rules apply to projects that begin construction on or after September 2, 2025, wind and solar projects can start construction before September 2, 2025 by beginning physical work of a significant nature or by incurring 5% of project costs.

Continuity Requirements

• If an applicable wind or solar facility is not placed in service within four years, the project developer will have to show continuous construction to be allowed more time to finish the project.

• Disruptions such as weather delays, permitting, supply chain shortages, and labor stoppages are allowed.

• Whether a taxpayer maintains a continuous program of construction to satisfy the Continuity Requirement will be determined by the relevant facts and circumstances.

Rooftop Solar Exclusion

The changes apply to utility-scale solar and provide a significant exclusion for smaller solar facilities, such as rooftop solar for homes and businesses. Solar projects with a maximum net output of 1.5 MWs or less can continue to claim the 5% safe harbor if they begin construction after September 2, 2025, and before July 4, 2026.

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New tariffs rates

Some countries negotiated tariff rates that are lower rates than initially threatened:

• The EU (15%), Japan (15%), South Korea (20%), Vietnam (20%), and the U.K. (10%).

Countries that have not negotiated a deal with the United States were hit with higher rates:

• Brazil (50%), Canada (35%), Switzerland (39%), Laos (40%) and Algeria (30%) saw increases.

• India and several others remain outside deals and face high default tariffs.

· The countries and rates are listed in the annex to the executive order.

Economic impact

• Commerce Secretary Howard Lutnick said the tariffs could raise $50 billion a month in revenue.

• Economists warned of the risk of rising inflation on U.S. consumers.

Geoeconomic impact

• Trump’s tariffs are reshaping global trade and using them as leverage on issues beyond trade, particularly against Brazil, which Trump has criticized for its prosecution of former Brazilian President Jair Bolsonaro.

Legal challenges remain

• The tariffs are under legal challenges for exceeding executive authority under the International Emergency Economic Powers Act of 1977. A New York trade court sided against Trump, but allowed tariffs to stay in place pending appeal.

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Key Terms

• Tariffs:

  • 15% tariff on ~70% of EU exports — covering €780 billion in trade.

  • Includes pharmaceuticals, semiconductors, and cars (down from 27.5%).

  • U.S. imports into the EU will not face new tariffs.

• Steel & aluminum: U.S. keeps 50% tariff; Europe gets a quota deal tied to past import levels.

• Zero-tariff sectors: €70B in trade spared — aircraft, some chemicals, generics, agricultural products, critical raw materials.

• Energy & weapons: EU pledges $750 billion in U.S. energy purchases and $600 billion in U.S. investments, plus undefined defense buys.

Geoeconomic impact

• Tariff leverage: Trump’s tariff threat forced the EU to make sweeping concessions.

• U.S. “win”: White House officials hailed the deal as the “biggest ever,” citing benefits for U.S. industry and security.

• A one-sided deal: The EU gains little beyond avoiding 30% tariffs.

• Not legally binding: EU officials stressed that investment and energy pledges are political commitments, not enforceable law.

• Security link: Analysts say EU leaders feared that rejecting Trump’s terms risked U.S. disengagement from NATO and Ukraine.

• WTO clash: Experts warn zero-tariff carveouts may violate global trade rules.

European Reactions

• Europe’s dilemma: Leaders say they avoided worse damage, but critics call the agreement “capitulation.”

• Germany: Economy minister Katharina Reiche admitted it was “challenging” but highlighted car and pharma relief. Chancellor Friedrich Merz warned the pact could cause “considerable damage.”

• France: PM François Bayrou called it a “dark day,” blasting agricultural concessions. Far-right leader Marine Le Pen dubbed it a “political, economic and moral fiasco.”

• Ireland: PM Micheál Martin said it brings “predictability,” but at a cost.

• Italy: Called the 15% tariff “sustainable,” emphasizing stability over conflict.

• Netherlands: “No tariffs would have been better,” said PM Dick Schoof, but he praised the Commission for damage control.

Legal challenges remain

• Legal test: U.S. courts are reviewing whether Trump exceeded his authority under the 1977 IEEPA law. A ruling against him could upend the tariff regime.

Longer Reads

• Donald Trump’s tariff blitz brings US levies to highest levels since 1930s, Financial Times, July 28, 2025

• What opponents of the EU-US trade deal get wrong, The Economist, July 30, 2025

• The trade deal with America shows the limits of the EU’s power, The Economist, July 31, 2025

• Donald Trump’s EU oil and gas deal is ‘pie in the sky’, energy experts warn, Financial Times, July 28, 2025

• Josh Lipsky, How Donald Trump remade global trade, The New Atlanticist, August 1, 2025

• Tariff roulette: inside Trump’s chaotic trade negotiations, Financial Times, August 1, 2025

• Lessons from the 1920s and 30s on tariffs and markets, Financial Times, August 3, 2025

• Trump’s tariffs leave us in the second worst of all worlds, Financial Times, August 4, 2025

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Key Facts

• Tariffs: U.S. auto tariffs lowered from 25% to 15% (still well above the original 2.5% rate). Steel and aluminum tariffs remain at 50%.

• Investment: Japan committed up to $550 billion in investment in the United States, including U.S. manufacturing, infrastructure, and supply chain projects.

• Purchases: Japan agreed to buy ~$8 billion in U.S. agricultural products, expand LNG offtake, and procure additional Boeing aircraft.

• Legal status: The deal is an executive agreement rather than a free trade agreement. Timelines for implementation are unclear.

• Trade balance: In 2024, Japan had a $70 billion surplus in trade with the United States.

Geoeconomic Impact

• The agreement demonstrates U.S. transactional trade diplomacy under which tariff relief is tied to pledges for investment and purchase.

• Japanese government officials framed the deal as avoiding harsher tariffs.

• Critics noted the lack of clarity on U.S. commitments and the lack of enforceability.

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Below are the key changes to the major energy tax provisions.

• Clean vehicle tax credits: The law accelerates the expiration of the “clean vehicle” tax credits for electric vehicles (EVs) to 2025 and 2026 from 2032.

• Residential energy efficiency credits: The law also accelerates the expiration of residential energy tax credits to 2025 and 2026.

• Technology-neutral tax credits: The OBBBA phases out the §45Y and §48E clean electricity production and investment credits beginning in 2034. The production and investment credits for wind and solar is repealed unless the project is placed in service before 2028. If the wind or solar project is placed in service after 2027, construction must begin before July 4, 2026.

• Foreign Entity of Concern (FEOC): The law expands the FEOC rules to restrict credit availability to taxpayers that are FEOC or receive material assistance from FEOCs.

• Carbon capture: The law implements the foreign entity rules for the §45Q carbon oxide sequestration credit. It also repeals transferability for facilities that begin construction two years from the bill’s enactment.

• Clean fuels: The law extends the Section 45Z clean fuel production credit through December 31, 2029, from the current expiration at the end of 2027.

• Credits transfers: The law retains the ability of entities to transfer credits but prohibits transfers to prohibited FEOCs or entities that receive material assistance from prohibited FEOCs.

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The final version of the OBBA extends the expiring individual and corporate tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA), provides new temporary tax provisions that Trump promised during the campaign, makes changes to business and international taxes, and reduces energy tax credits.

Key provisions in the OBBA include:

Individual Tax Provisions

• Makes TCJA rates permanent: The OBBA makes the TCJA rate and bracket changes permanent. The rate reductions were scheduled to expire at the end of 2025.

• Maintains limits on itemized deductions: The law maintains the limits on itemized deductions for high earners.

• Increases standard deduction: The law permanently increases the standard deduction by $750 to $15,750 for individuals, by $1,125 to $23,625 for heads of household, and by $1,500 to $31,500 for joint filers, all beginning in 2025. Amounts are then indexed for inflation.

• Eliminates personal exemption: The law makes permanent the personal exemption elimination enacted by the TCJA.

• Increases SALT deduction limit for five years: The law increases the limit on state and local tax deductions (SALT) from $10,000 to $40,000 for taxpayers earning up to $500,000. After five years, the limit returns to $10,000.

• Pass-Through Entity Tax (PTET) deduction: The OBBA did not include any changes to the PTET deduction.

• Increases and makes permanent the child tax credit: The law permanently increases the child tax credit by $200 to $2,200 per child, with the refundable portion remaining at $1,700.

• Temporarily makes overtime pay deductible: The law allows a deduction of up to $12,500 for overtime pay for taxpayers with incomes of less than $150,000 for tax years 2025 through 2028. Base pay would remain taxable.

• Temporarily makes tips deductible: The OBBA allows a deduction for tipped wages of up to $25,000 per taxpayer for tax years 2025 through 2028. An income phase out begins at $150,000. This applies to taxpayers in customarily tipped industries.

• Increases standard deduction for seniors: The law increases the standard deduction for seniors by $6,000 subject to an income limitation for tax years 2025 through 2028. An income phase out begins at $75,000.

• Temporarily makes auto loan interest deductible: The law makes the interest from auto loans fully deductible for tax years 2025 through 2028 for autos with final assembly in the United States. The deduction would be limited to $10,000 with an income phase out beginning at $75,000.

• Repeals individual energy credits: The law repeals energy tax credits for individuals, including the electric vehicle tax credit and the residential energy efficiency credits in the Inflation Reduction Act (IRA).

• Increases passthrough deduction: The law permanently extends the Section 199A passthrough deduction at 20%. It also increases the phase-in range for the limit to $75,000 for individuals and $150,000 for joint filers. There is a new $400 deduction for taxpayers with qualifying income of at least $1,000.

• Permanently extends alternative minimum tax thresholds: The law extends the TCJA exemption and phaseout threshold for the alternative minimum tax (AMT). The phaseout is set at $1 million in 2026 and adjusted for inflation thereafter with a phase out rate of 50%.

Estate Tax Provisions

• Increases estate tax exemption: The OBBA increases the estate tax exemption to $15 million beginning in 2026 and make it adjusted for inflation for subsequent years.

Business Tax Provisions

• Permanently allows immediate R&E expensing: The law permanently allows business taxpayers to fully expense Section 174 domestic research and experimental (R&E) expenditures in 2025 or later. This reverses the requirement to capitalize and amortize them over five years.

• Increases small business expensing: The law increases the Section 179 Small Business Expensing Cap from $1.25 million to $2.5 million per year. It also increases the phase-out threshold from $3.1 million to $4 million.

• Allows bonus depreciation permanently: The law permanently allows 100% bonus depreciation for short-lived investments in 2025 or later. Bonus depreciation has been subject to a phase-down since 2022.

• Reinstates EBITDA interest deduction limit: The bill would restore EBITDA-based limitation on business interest deductions under Section 163(j) for 2025 and later.

• Reduces corporate charitable deduction: The law allows deductions for corporate charitable contributions only to the extent that contributions exceed 1% of a corporation’s taxable income. This begins in 2026.

• Increases 1099-MISC reporting threshold for payments: The law increases the reporting threshold for Form 1099-MISC from $600 to $2,000 for payments in 2025 and after. The law also increases the threshold for Form 1099-K at $20,000 and 200 transactions.

• New Bonus Depreciation for Qualified Production Property: The law implements a new Section 168(n), which allows an elective 100% depreciation deduction for qualified production property (QPP) acquired between January 20, 2025 and the end of 2028 and placed in service by the end of 2030.

• Expands Qualified Small Business Stock (QSBS): The law expands Section 1202 QSBS stock acquired after July 4, 2025 through a tiered system of requirements to hold the stock.

Energy Tax Credits

• Phases out major clean energy tax credits: The law phases out clean energy tax credits.

International Tax Provisions

• Permanently increases GILTI deduction: The law increases the global intangible low taxed income (GILTI) deduction to 40%, replacing the scheduled post-2025 reduction to 37.5%. The law also modifies the GILTI calculation.

• Increases FDII deduction: The law increases the foreign-derived intangible income (FDII) deduction to 33.34%, replacing the scheduled post-2025 reduction to 21.875%. The bill would also rename the FDII “foreign-derived deduction eligible income” (FDDEI). The law also modifies the FDII calculation.

• Increases BEAT rate: The law also increases the base erosion and anti-abuse tax (BEAT) rate from the current 10% to 10.5%, avoiding the scheduled increase to 12.5% after 2025. It also makes permanent the treatment of research and other credits in calculating BEAT.

• New 1% tax on remittances: The law imposes a new 1% excise tax on certain remittance transfers, effective January 1, 2026.

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Like the House bill, the Senate version extends the expiring tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA), makes changes to corporate and international taxes, and reduces energy tax credits. The Senate bill requires $4 billion in spending cuts with the goal of $2 trillion in cuts. The House bill, by contrast, requires spending cuts of more than $1 trillion with the goal of $2 trillion in cuts. The Senate bill raises the debt ceiling by $5 trillion, compared to $4 trillion under the House bill.

Notably, the Senate bill uses a “current policy baseline” approach for calculating the cost of the bill. The approach reduces the projected fiscal impact of the tax cuts by assuming no cost to continuing the current tax policy. The House uses a “current law baseline,” which assumes that the TCJA tax cuts will expire as scheduled in the law and that extension of the tax cuts has a fiscal impact. The Senate’s approach allows for the permanent extension of certain tax provisions, a key difference between the House and Senate bills.

Key provisions in the Senate bill include:

Individual Tax Provisions

• Make TCJA rates permanent: The bill would make the TCJA rate and bracket changes permanent, the same as with the House bill.

• Maintain limits on itemized deductions: The Senate bill follows the House bill in maintaining the limits on itemized deductions for high earners.

• Increase standard deduction: The bill would permanently increase the standard deduction by $1,000 to $16,000 for individuals, by $1,500 to $24,000 for head of household filers, and by $2,000 to $32,000 for joint filers. It would also index the deductions to inflation. The House bill increases the standard deductions through the end of 2028 only.

• Eliminate personal exemption: The Senate bill would follow the House bill and make permanent the personal exemption elimination enacted by the TCJA.

• Increase SALT deduction limit: The Senate bill would extend the limit on state and local tax deductions (SALT) at the current $10,000. This limit is viewed as a placeholder for negotiations. The House bill, by contrast, would increase the limit to $40,000 for incomes up to $500,000.

• Limit Pass-Through Entity Tax (PTET) deduction: The Senate bill would limit the PTET deduction for individual owners to the greater of $40,000 or 50% of their allocation of the PTET. The House bill proposed to eliminate the PTET deduction for Specified Service Trades or Businesses (SSTBs), which include such professions as law, accounting, and medicine. Under the House bill, qualified trades or businesses would still be allowed to use the PTET as a workaround of the federal SALT $10,000 cap.

• Increase and make permanent the child tax credit: The Senate would permanently increase the child tax credit by $200 to $2,200 per child. The House bill would increase the credit to $2,500, but only through 2028.

• Temporarily make overtime pay deductible: The bill would allow a deduction of up to $12,500 for overtime pay for taxpayers with incomes of less than $150,000 for tax years 2025 through 2028. Base pay would remain taxable. The House bill proposed a full deduction for overtime pay for taxpayers with incomes of less than $160,000 for tax years 2025 through 2028.

• Temporarily make tips deductible: The bill would allow a deduction for tipped wages of up to $25,000 per taxpayer with an income phase out at $150,000. This would apply to taxpayers in customarily tipped industries. Like the House bill, the Senate would make the deduction available through 2028 only.

• Increase standard deduction for seniors: The bill would increase the standard deduction for seniors by $6,000 subject to an income limitation. The House bill proposed a temporary $4,000 increase.

• Temporarily make auto loan interest deductible: The Senate bill follows the House in making the interest from auto loans fully deductible for tax years 2025 through 2028 for autos with final assembly in the United States. The deduction would be limited to $10,000 and would phase out according to income.

• Repeal individual energy credits: Like the House bill, the Senate bill would repeal energy tax credits for individuals, including the electric vehicle tax credit and the residential energy efficiency credits in the Inflation Reduction Act (IRA).

• Increase passthrough deduction: The Senate bill would permanently extend the Section 199A passthrough deduction at 20%. The bill would also increase the phase-in range for the limit. The House bill proposed to increase the deduction to 23%.

• Alternative minimum tax: The Senate bill follows the House bill in extending the TCJA exemptions for the alternative minimum tax (AMT), but it would revert the phase-out thresholds to 2018 levels, indexed to inflation.

Estate Tax Provisions

• Increase estate tax exemption: The Senate bill proposes to increase the estate tax exemption to $15 million beginning in 2026 and make it adjusted for inflation for subsequent years. This is the same as in the House bill.

Business Tax Provisions

• Permanently allow immediate R&D expensing: The Senate bill would permanently allow business taxpayers to fully expense Section 174 domestic research and development (R&D) costs in the year they occur. The change would be retroactive for certain small businesses. The House bill limited this through 2029.

• Increases small business expensing: The Senate bill follows the House bill in proposes to increase the Section 179 Small Business Expensing Cap from $1.25 million to $2.5 million per year. Also, following the House, the Senate bill would increase the phase-out threshold from $2.5 million to $4 million.

• Extend bonus depreciation permanently: The Senate bill would permanently allow 100% bonus depreciation for short-lived investments. The House bill proposed to extend bonus depreciation through 2029 only.

• Reinstate EBITDA interest deduction limit: The bill would restore EBITDA-based limitation on business interest deductions under Section 163(j) permanently. The House bill limited this through 2029.

• Temporarily allow 100% expensing of qualifying non-residential structures: The Senate bill follows the House bill and would allow 100% expensing of qualifying non-residential structures in manufacturing, extraction, and agriculture sectors, with certain begin construction and placed in service requirements. Like the House bill, this would apply from 2025 to 2028.

• Reduces corporate charitable deduction: The Senate bill follows the House to allow a corporate deduction for charitable contributions only to the extent that contributions exceed 1% of a corporation’s taxable income.

• Increase 1099-MISC reporting threshold for payments: The Senate bill follows the House in repealing the $600 reporting threshold for Form 1099-K, reverting to the previous threshold of $20,000 and 200 transactions. Like the House bill, it would also increase the 1099-MISC reporting threshold for payments to an independent contractor or subcontractor from $600 to $2,000.

Energy Tax Credits

• Repeal major clean energy tax credits: The Senate bill follows the House in phasing out clean energy tax credits but has a longer time frame.

International Tax Provisions

• Permanently increase GILTI deduction: The Senate bill would increase the global intangible low taxed income (GILTI) deduction to 40%, compared to the 49.2% proposed in the House. This replaces the scheduled post-2025 reduction to 37.5%. The bill would also rename GILTI “net CFC tested income” (NCTI).

• Increase FDII deduction: The Senate bill would increase the foreign-derived intangible income (FDII) deduction to 33.34%, compared to the 36.5% proposed by the House. This replaces the scheduled post-2025 reduction to 21.875%. The bill would also rename the FDII “foreign-derived deduction eligible income” (FDDEI).

• Increase BEAT rate: The Senate bill would also increase the base erosion and anti-abuse tax (BEAT) rate from the current 10% to 14%, avoiding the scheduled increase to 12.5% after 2025. The House bill proposed to reduce the BEAT rate to 10.1%.

• Implement Section 899 retaliation against “unfair taxes”: The Senate bill would implement the House’s proposed Section 899, which allows the government to impose retaliatory taxes against countries, individuals, and entities of countries that have enacted any “unfair foreign tax.” The Senate bill would limit the rate to 15%, rather than the 20% under the House bill, and delay implementation until 2027, rather than 2026 under the House bill.

The Senate bill is only a step in the reconciliation process. The Senate must pass its proposed bill and send it back to the House for consideration and further negotiations. Both the House and Senate must pass the same budget resolution.

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Trump stated that China will supply upfront “full magnets, and any necessary rare earths,” Trump said. The United States will, in turn, allow Chinese students to attend U.S. colleges and universities. U.S. tariffs on imports of Chinese goods will be set at 55% and Chinese tariffs on imports of U.S. goods will be set at 10%.

Tariff rates

• U.S. 55% tariffs: The U.S. tariff of 55% is composed of the 20% fentanyl tariffs, the 10% IEEPA reciprocal tariffs, and the 25% Section 301 tariffs from Trump’s first term.

• Chinese 10% tariffs: The 10% tariffs restores the tariff rate that China agreed to in May.

Rare earth minerals and magnets

While Trump did not mention export controls on microchips in his announcement, U.S. officials stated that the administration may ease restrictions on the export of certain microchips if China complies with the agreement on critical minerals licenses for U.S. companies. The administration, however, would continue to restrict “very, very high-end Nvidia” chips used for AI. If China does not comply, the United States could impose additional controls that target critical industries or companies. An easing of microchip restrictions on China would reverse the Biden administration’s policy to prevent China’s access to U.S. technology that could have military application.

China restricted exports of rare earth minerals and magnets to the United States in April. After accusing China of violating the May agreement, U.S. official began to impose export restrictions on semiconductor design software, jet engine parts, chemicals, nuclear materials; they also began revoking visas for Chinese students.

Finalization

There are likely some disagreements still to be resolved, as the leaders of both sides must still sign off on the agreement. Given this uncertainty, there is still the risk that the tentative truce does not result in an official agreement.

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Trump imposed 25% tariffs on imports of steel and aluminum in March, relying on his previously invoked national security authority under Section 232 of the Trade Expansion Act of 1962.

Tariffs on steel and aluminum imports from the UK will remain at 25%. The Trump administration noted that changes were possible starting July 9, 2025, depending on the status of the U.S.-UK Trade Deal.

Trump stated that he increased the tariffs to protect U.S. industries and to “end unfair trade practices and the global dumping of steel and aluminum.”

Update: On June 16, 2025, the Commerce Department announced that the 50% tariffs on steel and aluminum products would cover home appliances including refrigerators, dishwashers, and washing machines.

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The House passed the bill by a vote of 215-214-1, with Republicans Thomas Massie of Kentucky and Warren Davidson of Ohio voting with Democrats against the bill. Andy Harris of Maryland, the leader of the House Freedom Caucus, voted present. Andrew Garbarino of New York and David Schweikert of Arizona missed the vote but support the bill. The bill now goes to the Senate, which is expected to make further changes. Key provisions in the House bill include:

Individual Tax Provisions

• Make TCJA rates permanent: The bill would make the TCJA rate and bracket changes permanent.

• Maintain limits on itemized deductions: The bill proposes to maintain the limits on itemized deductions for high earners.

• Increase standard deduction: The bill would increase the standard deduction by $1,000 to $16,000 for individuals, by $1,500 to $24,000 for head of household filers, and by $2,000 to $32,000 for joint filers through the end of 2028.

• Eliminate personal exemption: The bill would make permanent the personal exemption elimination enacted by the TCJA.

• Increase SALT deduction limit: The bill would increase the limit on state and local tax deductions (SALT) from the current $10,000 to $40,000 for incomes up to $500,000. The cap is reduced to $10,000 at a 30% rate for taxpayers with incomes of more than $500,000. The thresholds for the cap and income will increase 1% each year over 10 years.

• Revise Pass-Through Entity Tax (PTET) deduction: The bill would eliminate the PTET deduction for Specified Service Trades or Businesses (SSTBs), which include such professions as law, accounting, and medicine. Qualified trades or businesses would still be allowed to use the PTET as a workaround of the federal SALT $10,000 cap.

• Increase the child tax credit: The bill would increase the child tax credit by $500 to $2,500 per child for 2025 through 2028. The maximum credit would be inflation adjusted after 2028, making the credit permanent.

• Temporarily make overtime pay deductible: The bill would allow a full deduction for overtime pay for taxpayers with incomes of less than $160,000. Base pay would remain taxable. This would be available from 2025 through 2028 and exclude highly compensated employees and certain tips.

• Temporarily make tips deductible: The bill would allow a full deduction for tipped wages for incomes of less than $160,000 for tax years 2025 through 2028. This would apply to individuals in customarily tipped industries.

• Temporarily increase standard deduction for seniors: The bill would increase the standard deduction for seniors by $4,000 to $19,000 for tax years 2025 through 2028. The deduction would phase out according to income.

• Temporarily make auto loan interest deductible: The bill would make the interest from auto loans fully deductible for tax years 2025 through 2028 for autos with final assembly in the United States. The deduction would be limited to $10,000 and would phase out according to income.

• Repeal individual energy credits: The bill would repeal energy tax credits for individuals, including the electric vehicle tax credit and the residential energy efficiency credits in the Inflation Reduction Act (IRA).

• Alternative minimum tax: The bill would extend the TCJA exemptions for the alternative minimum tax (AMT).

• Increase passthrough deduction: The bill would increase the Section 199A passthrough deduction for qualified business income (QBI) from 20% to 23%.

Estate Tax Provisions

• Increase estate tax exemption: The bill would increase the estate tax exemption to $15 million beginning in 2026 and make it adjusted for inflation for subsequent years.

Business Tax Provisions

• Temporarily allow immediate R&D expensing: The bill would allow business taxpayers to fully expense Section 174 domestic research and development (R&D) costs in the year they occur for tax years 2025 through 2029.

• Increases small business expensing: The bill would increase the Section 179 Small Business Expensing Cap from $1.25 million to $2.5 million per year. The bill also increases the phase-out threshold from $2.5 million to $4 million.

• Temporarily allow bonus depreciation: The bill will allow 100% bonus depreciation for short-lived investments from 2025 through 2029.

• Temporarily reinstate EBITDA interest deduction limit: The bill would restore EBITDA-based limitation on business interest deductions under Section 163(j) from 2025 through 2029.

• Temporarily allow 100% expensing of qualifying non-residential structures: The bill would allow 100% expensing of qualifying non-residential structures in manufacturing, extraction, and agriculture sectors, with certain begin construction and placed in service requirements. This would apply from 2025 to 2028.

• Reduces corporate charitable deduction: The bill would allow a corporate deduction for charitable contributions only to the extent that contributions exceed 1% of a corporation’s taxable income.

• Increase 1099-MISC reporting threshold for payments: The House bill would repeal the $600 reporting threshold for Form 1099-K, reverting to the previous threshold of $20,000 and 200 transactions. The bill would also increase the 1099-MISC reporting threshold for payments to an independent contractor or subcontractor from $600 to $2,000.

Energy Tax Credits

• Repeal major clean energy tax credits: The bill repeals and phases out clean energy tax credits. This includes various production tax credits and investment tax credits for clean electricity, nuclear electricity, and hydrogen.

International Tax Provisions

• Permanently increase GILTI deduction: The bill would increase the global intangible low taxed income (GILTI) deduction to 49.2% after 2025. This replaces the scheduled post-2025 reduction to 37.5%.

• Increase FDII deduction: The bill would increase the foreign-derived intangible income (FDII) deduction to 36.5%. This replaces the scheduled post-2025 reduction to 21.875%.

• Decrease BEAT rate: It would also increase the base erosion and anti-abuse tax (BEAT) rate from the current 10% to 10.1%, avoiding the 12.5% scheduled to take effect in 2026.

• Implement retaliatory measures against “unfair taxes”: The bill would implement Section 899, which allows the government to impose retaliatory taxes up to 20% against countries, individuals, and entities of countries that have enacted any “unfair foreign tax.” This would be effective January 1, 2026.

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Key changes in the bill

Repeal credits after 2025 and 2026

• Clean vehicle tax credits: The bill would repeal the “clean vehicle” tax credits for electric vehicles (EVs), currently scheduled to expire at the end of 2032. Under the proposed legislation, the §25E used vehicle credit, the §30C clean vehicle credit, and the §45W commercial clean vehicle credit would expire at the end of 2025. The §30D new clean vehicle credit would expire at the end of 2026.

• §25D Residential clean energy credit: The bill would accelerate the expiration of the §25D residential clean energy credit to the end of 2025 from the end of 2034.

• §45L Energy efficient home credit: The bill would accelerate the expiration of the §45L energy efficient home credit to the end of 2025 or the end of 2026 for home for which construction began before May 12, 25 2025.

• §45V Clean hydrogen production credit: The bill would end the §45V clean hydrogen production credit on January 1, 2026 rather than on the current schedule of January 1, 2033.

Impose restrictions on foreign entities from “countries of concern”

A key proposal in the bill is to apply the foreign entity restrictions to the energy tax credits. This would disallow credits to a specified foreign entity, as defined in §7701(a)(51)(B), for any tax year beginning after the date of the bill’s enactment. It would also deny the credit to a “foreign-influenced entity,” as defined in §7701(a)(51)(D), for any tax year beginning two years after the date of the bill’s enactment. These foreign entities are companies connected to “countries of concern,” which are China, Russia, Iran, and North Korea.

Implement foreign entity rules for §45Q carbon oxide sequestration credit

The bill would implement the foreign entity rules for the §45Q carbon oxide sequestration credit. It would also repeal transferability for facilities that begin construction two years from the bill’s enactment.

Phase out §45Y and §48E clean electricity production and investment credits

The bill would phase out the §45Y clean electricity production credit and the §48E clean electricity investment credit beginning in 2029. Under current law, both the tax credits phase out beginning the later of 2032 or when U.S. greenhouse gas emissions from electricity are 25% of 2022 emissions or lower.

The credit rate would phase out along the follow schedule:

• 100% for projects placed in service on or before December 31, 2028;

• 80% for projects placed in service beginning in calendar year 2029;

• 60% for projects placed in service beginning in calendar year 2030;

• 40% for projects placed in service beginning in calendar year 2031;

• 0% for projects placed in service beginning after December 31, 2031.

The bill would also apply the foreign entity restrictions to the credit and repeal transferability for projects that begin construction after two years from when the bill is enacted.

Phase out §48 energy credit

The bill would phase out the §48 energy credit beginning in 2032. Under current law, the credit phases out in 2035. The credit rate for ground or groundwater as a thermal energy source would phase out along the following schedule:

• 6% for property that begins construction before January 1, 2030 and is placed in service after December 31, 2021;

• 5.2% for property that begins construction after January 1, 2029 and before January 1, 2031;

• 4.4% for property that begins construction after December 31, 2030 and before January 1, 2032;

• 0% for property that begins construction after December 31, 2031;

The bill would also apply the foreign entity restrictions to the credit and repeal transferability for projects that begin construction after two years from when the bill is enacted.

Phase out §45U production credit for zero-emissions nuclear facilities

The bill would phase out the §45U production credit for nuclear energy from 2029 to 2032. Under current law, the credit phases out in 2033.

The credit rate would phase out along the following schedule:

• 100% for projects placed in service on or before December 31, 2028;

• 80% for projects placed in service beginning in calendar year 2029;

• 60% for projects placed in service beginning in calendar year 2030;

• 40% for projects placed in service beginning in calendar year 2031;

• 0% for projects placed in service beginning after December 31, 2031.

The bill would also apply the foreign entity restrictions to the credit and repeal transferability for energy produced after 2027.

Exclude wind components from §45X advanced manufacturing production credit

The bill would eliminate the §45X advanced manufacturing production credit for wind energy components sold after December 31, 2027 and eliminate the credit for all other components sold after 2031. It would also implement the foreign entity rules and repeal transferability for components sold after 2027.

Extend and limit §45Z clean fuel production credit

The bill would extend the §45Z clean fuel production credit until December 31, 2031 from the current expiration at the end of 2027. Fuel sold after December 31, 2025, would be required to be “exclusively derived” from feedstock produced or grown in the United States, Mexico, or Canada.

Lifecycle greenhouse gas emissions would exclude any emissions attributed to indirect land use changes. Also, a distinct emissions rates would be provided for transportation fuels derived from animal manure, including dairy, swine, and poultry.

The bill would also apply the foreign entity restrictions to the credit and repeal transferability for fuel produced after 2027.

Republican factions

The proposed changes to the energy tax credits received pushback from within the Republican Party with different factions forming. Rep. Jen Kiggans of Virginia asked House leadership to “consider three thoughtful changes” to the legislation. First, she stated that the foreign entity restrictions are “overly prescriptive” and should be revised to allow companies additional time to reorganize their supply chains. Second, she requested that the “placed in service” standard be replaced with a “start construction” standard. Third, she requested that the transferability of the credits remain through the entire phase-out period.

Additionally, 21 House Republicans asked in a letter to Rep. Jason Smith, chair of the House Ways and Means Committee, that “any proposed changes to the tax code be conducted in a targeted and pragmatic fashion that promotes conference priorities without undoing current and future private sector investments which will continue to increase domestic manufacturing, promote energy innovation, and keep utility costs down.”

In a competing faction, 38 Republicans asked in a letter to Smith for a “full repeal” of the tax credits. "We are deeply concerned that President Trump’s commitment to restoring American energy dominance and ending what he calls the ‘green new scam’ is being undermined by parochial interests and short-sighted political calculations,” they wrote.

In April, four Senate Republicans warned against a “full-scale” repeal of energy tax credits. “While we support fiscal responsibility and prudent efforts to streamline the tax code, we caution against the full-scale repeal of current credits, which could lead to significant disruptions for the American people and weaken our position as a global energy leader,” wrote senators Lisa Murkowski of Alaska, John Curtis of Utah, Thom Tillis or North Caroline, and Jerry Moran of Kansas.

Competing legislation

A group of Republicans introduced the “Certainty for Our Energy Future Act,” which would repeal clean energy production and investment tax credits for solar and wind projects.

Another group of Senate and House Republicans introduced the Energy Freedom Act, which would eliminate each energy tax credit created or expanded by the IRA for tax years beginning after December 31, 2025.