Policy Risk Monitor – January 2, 2025
A weekly news scan of key policy areas to help firms identify and monitor policy risks.
Tax
Trump Vows to Cut Corporate Tax Rate to 15% for Domestic Production
President-elect Donald Trump promised to cut the corporate tax rate to 15% for companies that manufacture in the United States. “You pay 21% if you don’t build here. If you do, we’re going to try and get it to 15%, but you have to build your product, make your product in the USA,” Trump said.
[See Tax Policy Alert: Trump Tax Policy Continues to Evolve.]
Trump Advisers Consider Doubling SALT Deduction Limit to $20,000
Trump’s economic advisers are considering doubling the deduction for state and local taxes (SALT) to $20,000. A group of House Republicans from high-tax states is demanding an increase to the deduction limit in exchange for support of an extension of the Tax Cuts and Jobs Act (TCJA). The idea of removing the limit entirely is off the table. Residents of New York, New Jersey, and California are the primary beneficiaries of the SALT deduction.
Study Finds Tax Cuts Might Not Boost Economy
A new analysis from the nonpartisan Committee for a Responsible Federal Budget (CRFB) found that the “economic effects of extending the expiring parts of the Tax Cuts and Jobs Act (TCJA) would offset 1 to 14 percent of the revenue loss – falling well short of the 100 percent needed to pay for itself.” According to the report, new data from the Congressional Budget Office (CBO) found that “economic feedback may not cover any of the revenue loss and that TCJA extension might even add more to the debt on a dynamic basis, particularly over the long run, than under conventional scoring.”
Trade
USTR Investigates China’s Semiconductor Policies
U.S. Trade Representative Katherine Tai announced a Section 301 investigation regarding “China’s acts, policies, and practices related to targeting of the semiconductor industry for dominance.” The announced stated that “[evidence indicates that China seeks to dominate domestic and global markets in the semiconductor industry and undertakes extensive anticompetitive and non-market means, including setting and pursuing market share targets, to achieve indigenization and self-sufficiency.” Chin’s acts, policies, and practices appear to have and to threaten detrimental impacts on the United States and other economies, undermining the competitiveness of American industry and workers, critical U.S. supply chains, and U.S. economic security.
Trump Warns EU to Buy More U.S. Oil and Gas or Face Tariffs
President-elect Donald Trump threatened the European Union with tariffs unless they buy more U.S. oil and gas. “I told the European Union that they must make up their tremendous deficit with the United States by the large scale purchase of our oil and gas. Otherwise, it is TARIFFS all the way!!!,” he said on Truth Social. "The EU is committed to phasing out energy imports from Russia and diversifying our sources of supply," an EU spokesperson said, according to Reuters.
Canada Considering Export Taxes on Uranium and Oil if U.S. Imposes Tariffs
Canada is examining the use of export taxes on major commodities, notably uranium and oil, if the United States imposes tariffs on the country’s exports. The country would likely first impose retaliatory tariffs on U.S. goods and export controls on certain Canadian products, Bloomberg reported.
EU Officials Consider New Trade Remedies against Chinese Imports
EU policymakers are worried that traditional trade measures would be too slow to deploy and would rely on a strong consensus from member states, the Financial Times reported. Officials are concerned that divisions between the EU member states over trade with China will hurt the EU’s ability to oppose a potential flood of cheap goods from China.
Foreign Investment
CFIUS Raises Concerns about Nippon-U.S. Steel Deal
The Committee on Foreign Investment in the United States (CFIUS) reported to the White House that the panel had not reached consensus that the Nippon Steel Corp.’s acquisition of U.S. Steel did not pose any security risks. In an attempt to save the deal, Nippon later offered the U.S. government a veto over any reduction in US Steel Corp.’s production capacity. CFIUS had raised concerns that the transaction would lead to a decline in U.S. steel production.