Latest news with #RevenueActof1968
Yahoo
11-04-2025
- Business
- Yahoo
Ben Shapiro slams Trump's tariffs as hidden tax amid $11 trillion stock market wipeout
The stock market turmoil has deepened to the point where even some of President Trump's staunchest allies are voicing concern. After the so-called 'Liberation Day' announcement, conservative commentator Ben Shapiro criticized the administration's erratic economic approach, calling the now-paused tariffs a covert tax hike on consumers and businesses nationwide. I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 5 of the easiest ways you can catch up (and fast) Nervous about the stock market in 2025? Find out how you can access this $1B private real estate fund (with as little as $10) Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan 'works every single time' to kill debt, get rich in America — and that 'anyone' can do it " Trump's reciprocal tariffs impose hundreds of billions of dollars in new taxes on Americans,' said Shapiro on his podcast. '[It] would be the largest tax increase since the Revenue Act of 1968. One of the biggest tax increases on American consumers in the history of America." Surprisingly, Shapiro's description of the Trump tariffs, which were paused for 90 days on April 9, echoes that of former Vice President Kamala Harris, who referred to Trump's tariff proposals as a 'sales tax on the American people' during last year's campaign. Here's why the administration is facing growing backlash for its global trade war — even from its core supporters. While Trump calls tariffs a 'beautiful thing to behold,' economists would describe them as import taxes. 'Tariffs are federal taxes, set by Congress, and applied to goods at the border,' confirmed Robert Gulotty, an associate professor in the Department of Political Science at the University of Chicago. In many cases, these additional taxes are passed along to the consumer. The Peterson Institute for International Economics estimates that an average American family pays an additional $1,200 per year due to tariffs. It's worth noting that the institute's analysis already factors in the offsetting impact of the extended Tax Cuts and Jobs Act but does not account for additional tariffs announced by the Trump administration after February. Put simply, the true cost to families is likely much higher. Since many consumers and businesses cannot afford these added expenses, the economic outlook has weakened, and the stock market appears to reflect that. Read more: The US stock market's 'fear gauge' has exploded — but this 1 'shockproof' asset is up 14% and helping American retirees stay calm. Here's how to own it ASAP From the beginning of this year through April 7, the S&P 500 had lost roughly 15% in value, while the Nasdaq-100 and Dow Jones Industrial Average had fallen 18% and 12%, respectively. According to MarketWatch, U.S. stocks have lost $11 trillion in market value since Trump's inauguration. The Dow Jones and S&P 500 did experience a big jump once the tariffs were paused. However, the rapid erosion of wealth on this tariff-laden rollercoaster has left many ordinary Americans questioning the White House's economic policies. According to a recent Reuters/Ipsos poll, Trump's approval rating now stands at just 43%. Meanwhile, another poll by the Marquette Law School found that 58% of adults believe tariffs hurt the U.S. economy. Unfortunately, these polls haven't swayed the president's position. On April 7, he announced an additional 50% tariff on Chinese imports if it doesn't withdraw its 34% reciprocal tariffs on American imports, according to the Associated Press. In other words, the trade war is escalating. With no resolution in sight, consumers and investors should brace for a prolonged global trade conflict. If tariffs start back up again, consumers should build a margin of safety into their household budgets in anticipation of rising costs. Meanwhile, investors may want to seek refuge in hard assets like gold. The price of gold has surged 15.8% over the past six months. However, no asset class or nation is immune to the economic volatility that appears to be in store ahead. "Trade wars are, in fact, not good and not easy to win, particularly if you don't actually have a plan," Shapiro said. Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Here are 3 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you? This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
Yahoo
04-04-2025
- Business
- Yahoo
‘There will be blood': JPMorgan raises recession risk to 60% as global stock market sell off continues
Bank economists estimate Trump's tariff increase would cost U.S. households $700 billion, equivalent to the largest de facto tax hike levied since LBJ's Revenue Act of 1968 financed his war in Vietnam. President Donald Trump's package of tariffs to be levied starting next week could plunge not just the United States into recession but the entire world along with it. That's the simple conclusion reached by the top economic minds at JPMorgan. In a research report published on Thursday titled 'There will be Blood', the Wall Street investment bank argued other global markets would not be resilient enough to escape the gravitational forces of a shrinking U.S. economy weighted down by tariffs. Revising its 2025 forecasts for the second time in five weeks, JPMorgan said it was caught off guard by the Trump administration's 'extreme' agenda symbolized by the raft of hefty import duties announced during Trump's so-called 'Liberation Day.' As a result of the White House's attempt to convert its trade deficit into a problem for America's trading partners, JPMorgan has now ratcheted up the probability of a global recession to 60% from 40% previously. Yet far from making America wealthy again as Trump has promised, JPMorgan calculates taht the tariffs will cost U.S. consumers roughly $700 billion—a de facto tax hike nearly as painful relative to the size of the economy as Lyndon B. Johnson's Revenue Act passed to finance America's war in Vietnam. 'If sustained, this year's ~22%-point tariff increase would be the largest U.S. tax hike since 1968,' the bank said, estimating its impact at 2.4% of domestic GDP. The latest actions lift the average tariff rate higher than even those seen during the Smoot-Hawley Tariff Act of 1930, an act that many economists argue played a key role in exacerbating the Great Depression. 'A strong case can be made that the latest tariffs are more damaging given that the share of imports and broader globalization are considerably larger now than in the 1930s,' JPMorgan continued. The Trump administration has argued a healthy manufacturing base is important to national security, worth the short-term pain to claw back heavy industry that was hollowed out over many years and moved offshore. And indeed, the pandemic did reveal globalization had its flaws, as the lack of certain $1 commodity semiconductors made in Taiwan prevented the manufacture of a $40,000 passenger car stateside. However, due to the dimensions and arbitrary nature of the tariffs—determined not through reciprocal tariff rates but trade imbalances—their imposition risks sparking a retaliatory trade war where other countries erect their own protectionist walls in a tit-for-tat escalation. Here JPMorgan analysts admit it becomes almost impossible to predict the outcome given the many variables at play. Business sentiment and supply chain disruption could either mitigate or exacerbate the effects of the tariffs. As a result, on Thursday the markets suffered their worst day since the COVID outbreak five years ago, with $3 trillion worth of value wiped off U.S. equities. A key factor could be upcoming negotiations, in which the Trump administration is expected to seek concessions from partners that could reduce the trade deficit in exchange for the U.S. lowering its tariff rates. There are some fundamental economic realities that most likely will not change no matter what tariff is charged. Take the semiconductor industry as an example. Fabricating chips is a capital-intensive business that requires specialized knowledge, critical mass and economies of scale. Taiwan didn't simply become the world's foundry—it aggressively invested in this specialization. Its grip on third-party chip production makes it a critical partner for the U.S. and acts as a strategic deterrent against Chinese aggression. By comparison, U.S. chip companies like AMD that once made their own chips hived off this side of their operations to focus on the more lucrative and less risky design and distribution. So called 'fab-less' peers like Nvidia outsourced their production to foreign chip fabs from the very beginning. JPMorgan raises this issue as a potential stumbling block and source of friction during negotiations, limiting the room for manoever and raising the risk of a protracted trade war. 'Importantly, existing bilateral trade imbalances are linked to comparative advantages that promote efficiencies and are generally independent of barriers to trade,' it said. This story was originally featured on Sign in to access your portfolio
Yahoo
04-04-2025
- Business
- Yahoo
4 takeaways as investors survey the tariff damage to markets: Morning Brief
The first and most obvious takeaway from this week's tariff announcement was the stock market's instant reaction. Red was the color of the day as stock charts nosedived following the rollout of President Trump's reciprocal tariffs. The S&P 500 (^GSPC) fell 4.8%, its worst day since pandemic news roiled markets in 2020. For weeks, investors and analysts tried to divine the size and scope of the levies, who exactly would be impacted and by how much. That uncertainty partially ended once the policy was unveiled, and when the tide went out, it was clear that the market had utterly failed to price in the news. Market observers were left in shock as the tariffs came in stiffer and more far-reaching than many had expected. On the one hand, tariffs may still be used as a negotiating tool to extract trade concessions from other governments. But their immediate impact sparked a panic in the markets as the prospects for higher prices, stalled growth, and escalating tensions were thrust into the spotlight. The recession calculus has just changed dramatically. Wall Street economists are raising the alarm that an economic decline could be on the horizon. Part of the rush in reactions to the tariff policy was a recalibration by economists and strategists, paring down their growth forecasts as a new, protectionist regime could weigh heavily on US commerce. As JPMorgan economist Michael Feroli put it in a note, the reciprocal tariffs can be seen as 'the largest tax increase since the Revenue Act of 1968.' The inflationary impact of the levies, he wrote, could turn disposable income growth negative and shrink consumer spending, noting, "This impact alone could take the economy perilously close to slipping into recession." Echoing those concerns, Oxford Economics economist Ryan Sweet said the economy has become "dangerously vulnerable" to a recession over the next 12 months. The Fed is between a rock and a hard place. "Wait and see" has been the mantra of the US central bank for the weeks leading up to 'Liberation Day.' But deciding when to adjust rates is a harder job to do when sweeping tariffs can pressure both sides of the Fed's mandate. (As a tax on imported goods, tariffs can raise prices and stall growth.) Traders predict that the tariffs will lead to more rate-cutting rather than less. That's a signal that the Fed is more likely to guard against labor weakness and recession, even if prices rise as a result of the levies. But the central bank has still not tamed inflation. And it remains to be seen if the scope and intensity of tariffs will darken Americans' expectations about price increases in the months and years ahead. Either way, stagflation may leave the Fed with two bad options. The global trading order gets a shake-up. Friend and foe alike will be hit with reciprocal tariffs. That's the first step in what the president envisions as a more fair trading system for the US. Boosting American manufacturing and incentivizing foreign companies to invest here is one overarching goal behind the blanket tariffs. But the global reckoning may inspire other outcomes. Foreign governments, beholden to their own constituencies and grappling with domestic and regional politics, have already vowed to take countermeasures. (Treasury Secretary Scott Bessent urged trading partners not to retaliate against the new tariffs.) The uncertainty surrounding what comes next and how the targeted nations will respond can further chill business investment. And the prospects of special carveouts and side deals may also discourage companies from setting up shop on US shores. That's because if the tariffs are seen as temporary, pouring resources and years into building American factories might seem ill-advised. But if, as some global leaders warned, a ramp-up in the trade war is coming, this week may be only the beginning. Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban. Sign in to access your portfolio
Yahoo
04-04-2025
- Business
- Yahoo
Trump wants to cut taxes for Americans. His $700bn tariffs raid could pay for it
Alarm bells may have rung across the globe after Donald Trump's announcement on Wednesday but closer to home the president's tariffs blitz also amounts to America's biggest tax rise in nearly 60 years. His 'reciprocal' measures alone will raise nearly $400bn (£305bn) of new revenue, according to JPMorgan, with the cash that businesses pay on tariffs going directly into the pocket of the US government. 'This would be the largest tax increase since the Revenue Act of 1968,' says Michael Feroli, an economist at the investment bank. On the surface, it feels contradictory for a US president who has promised to slash taxes for Americans to start dipping into the pockets of American businesses. But Trump has bigger plans for his windfall: he wants to use the revenue raised from the tariffs to pay for cuts to taxes paid by US citizens. 'For years, hard working American citizens were forced to sit on the sidelines as other nations got rich and powerful, much of it at our expense. But now it's our turn to prosper and, in doing so, use trillions and trillions of dollars to reduce our taxes,' Trump said in his White House Rose Garden speech. 'Now we're going to pass the largest tax cuts in American history.' The sums that Trump can play with are huge. Wednesday's barrage came on top of charges already imposed on imports from Canada, Mexico and China, as well as all steel and aluminium imports. All in, Citi bank calculates that Trump's tariffs will raise at least $700bn for America's public purse – a colossal sum equivalent to double the GDP of Portugal. Ironically, Trump's flagship 'tax cut' will actually mean simply maintaining the status quo. A package of tax reductions including sweeping income tax cuts passed during his first term, known as the 2017 Tax Cuts and Jobs Act, was only temporary and is due to expire at the end of December. This means that if Donald Trump does nothing, millions of Americans will be hit by income tax rises at the start of 2026. Trump is now pushing Congress to pass a package that would make the 2017 Tax Cuts and Jobs Act permanent. Republicans are hoping to tag on additional tax cuts to these plans. Keeping the 2017 tax cuts in place will cost $5.5 trillion over the next decade, or around $550bn per year – a figure that will almost wipe out the lion's share of Trump's $700bn tariff windfall. James Knightley, chief international economist at ING bank in New York, says making the 2017 tax cuts permanent will be the president's main priority. Partly, this is because Trump knows tax cuts are essential for maintaining his support. US Chamber of Commerce polling last month showed overwhelming public backing for extending the 2017 cuts, with the share of those in favour outnumbering those against by a ratio of three to one. 'We may see Trump lean into the tax cuts, which could be accelerated and be bigger than originally thought as an effort to give the market what would be a very welcome proverbial dessert,' Libby Cantrill, head of US public policy at Pimco, said. And economic pain will make them even more urgent. American stocks slumped on Thursday, with the S&P 500 falling by as much as 4.5pc and the Nasdaq dropping by as much as 5.9pc. After extending his 2017 cuts, Trump's next priority is likely to be cutting corporation tax for companies that produce their goods in America from 21pc to 15pc. This is a key part of Trump's bid to get companies to bring their operations back to American shores. The measure would cost between $20bn and $30bn a year. Trump will also push to end tax on tips, a campaign promise that actually received bipartisan support, says Knightley. 'I think that one would be easier to get through.' This would also cost around $30bn a year. If Trump presses ahead with all three of these tax cuts, the combined cost would therefore be around $610bn, in theory leaving him about $90bn to play with. But this would not be enough to cover the bill of Trump's other promises to make overtime pay tax-free, which would cost around $200bn a year, or exempt social security benefits from tax, at a cost of around $100bn, says Knightley. In total, then, Trump has outlined plans for tax cuts that would cost the public purse more than $1 trillion a year – far more than he can claw in from his new tariffs. Trump needs to get tax cuts approved by Congress – to do this, he needs to show that he can balance the books. And economists warn that simple calculations on tariff revenue and tax cuts do not account for the fact that tariffs are likely to depress tax revenues elsewhere. Warnings are mounting that if he keeps his tariffs in place, Trump will push the US economy into a painful downturn. Mark Haefele, from UBS, warned in a client note on Wednesday that: '[if] the tariffs announced today remain in place for more than three to six months … we believe this could lead to a US recession.' Tariffs will drive up inflation. Pimco warns that consumer price growth could accelerate to 4.5pc, nearly double the current 2.8pc rate of inflation. Higher inflation means that real incomes could drop this year, bringing consumer spending down with it, says JPMorgan's Feroli. 'This is before accounting for the additional hits to gross exports and to investment spending.' Companies will pull-back on hiring and investment, says Andrew Hollenhurst, US chief economist at Citi. Though foreign producers may pay for some of the tariff charges, at least part of the cost will be extracted by American consumers, he says. High tariffs to pay for tax cuts may therefore be a self-defeating logic. 'What you're doing is you're giving with one hand but taking away with another,' says Knightley. While tariffs will hit poorer families hardest, the benefits of income tax cuts will be felt primarily by higher earners. This could prove a major threat to Trump's support in the rust belt. In turn, aggressive tariff charges may bring in less than expected because lower economic growth could reduce income tax receipts, says Knightley. 'If there is weaker consumer activity and weaker jobs, we're going to get less revenue from other sources. If the economy starts losing jobs, we're going to get less payroll tax revenue.' While tax cuts for ordinary citizens could offset some of the economic toll from higher tariffs, they will not be able to shield America from an incoming economic tornado of higher inflation, a slump in spending, job losses and the increasingly likely prospect of recession. Or in other words, Trump could simply be shooting himself in the foot. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Telegraph
04-04-2025
- Business
- Telegraph
Trump wants to cut taxes for Americans. His $700bn tariffs raid could pay for it
Alarm bells may have rung across the globe after Donald Trump's announcement on Wednesday but closer to home the president's tariffs blitz also amounts to America's biggest tax rise in nearly 60 years. His 'reciprocal' measures alone will raise nearly $400bn (£305bn) of new revenue, according to JPMorgan, with the cash that businesses pay on tariffs going directly into the pocket of the US government. 'This would be the largest tax increase since the Revenue Act of 1968,' says Michael Feroli, an economist at the investment bank. On the surface, it feels contradictory for a US president who has promised to slash taxes for Americans to start dipping into the pockets of American businesses. But Trump has bigger plans for his windfall: he wants to use the revenue raised from the tariffs to pay for cuts to taxes paid by US citizens. 'For years, hard working American citizens were forced to sit on the sidelines as other nations got rich and powerful, much of it at our expense. But now it's our turn to prosper and, in doing so, use trillions and trillions of dollars to reduce our taxes,' Trump said in his White House Rose Garden speech. 'Now we're going to pass the largest tax cuts in American history.' The sums that Trump can play with are huge. Wednesday's barrage came on top of charges already imposed on imports from Canada, Mexico and China, as well as all steel and aluminium imports. All in, Citi bank calculates that Trump's tariffs will raise at least $700bn for America's public purse – a colossal sum equivalent to double the GDP of Portugal. Ironically, Trump's flagship 'tax cut' will actually mean simply maintaining the status quo. A package of tax reductions including sweeping income tax cuts passed during his first term, known as the 2017 Tax Cuts and Jobs Act, was only temporary and is due to expire at the end of December. This means that if Donald Trump does nothing, millions of Americans will be hit by income tax rises at the start of 2026. Trump is now pushing Congress to pass a package that would make the 2017 Tax Cuts and Jobs Act permanent. Republicans are hoping to tag on additional tax cuts to these plans. Keeping the 2017 tax cuts in place will cost $5.5 trillion over the next decade, or around $550bn per year – a figure that will almost wipe out the lion's share of Trump's $700bn tariff windfall. James Knightley, chief international economist at ING bank in New York, says making the 2017 tax cuts permanent will be the president's main priority. Partly, this is because Trump knows tax cuts are essential for maintaining his support. US Chamber of Commerce polling last month showed overwhelming public backing for extending the 2017 cuts, with the share of those in favour outnumbering those against by a ratio of three to one. 'We may see Trump lean into the tax cuts, which could be accelerated and be bigger than originally thought as an effort to give the market what would be a very welcome proverbial dessert,' Libby Cantrill, head of US public policy at Pimco, said. And economic pain will make them even more urgent. American stocks slumped on Thursday, with the S&P 500 falling by as much as 4.5pc and the Nasdaq dropping by as much as 5.9pc. After extending his 2017 cuts, Trump's next priority is likely to be cutting corporation tax for companies that produce their goods in America from 21pc to 15pc. This is a key part of Trump's bid to get companies to bring their operations back to American shores. The measure would cost between $20bn and $30bn a year. Trump will also push to end tax on tips, a campaign promise that actually received bipartisan support, says Knightley. 'I think that one would be easier to get through.' This would also cost around $30bn a year. If Trump presses ahead with all three of these tax cuts, the combined cost would therefore be around $610bn, in theory leaving him about $90bn to play with. But this would not be enough to cover the bill of Trump's other promises to make overtime pay tax-free, which would cost around $200bn a year, or exempt social security benefits from tax, at a cost of around $100bn, says Knightley. In total, then, Trump has outlined plans for tax cuts that would cost the public purse more than $1 trillion a year – far more than he can claw in from his new tariffs. Trump needs to get tax cuts approved by Congress – to do this, he needs to show that he can balance the books. And economists warn that simple calculations on tariff revenue and tax cuts do not account for the fact that tariffs are likely to depress tax revenues elsewhere. Warnings are mounting that if he keeps his tariffs in place, Trump will push the US economy into a painful downturn. Mark Haefele, from UBS, warned in a client note on Wednesday that: '[if] the tariffs announced today remain in place for more than three to six months … we believe this could lead to a US recession.' Tariffs will drive up inflation. Pimco warns that consumer price growth could accelerate to 4.5pc, nearly double the current 2.8pc rate of inflation. Higher inflation means that real incomes could drop this year, bringing consumer spending down with it, says JPMorgan's Feroli. 'This is before accounting for the additional hits to gross exports and to investment spending.' Companies will pull-back on hiring and investment, says Andrew Hollenhurst, US chief economist at Citi. Though foreign producers may pay for some of the tariff charges, at least part of the cost will be extracted by American consumers, he says. High tariffs to pay for tax cuts may therefore be a self-defeating logic. 'What you're doing is you're giving with one hand but taking away with another,' says Knightley. While tariffs will hit poorer families hardest, the benefits of income tax cuts will be felt primarily by higher earners. This could prove a major threat to Trump's support in the rust belt. In turn, aggressive tariff charges may bring in less than expected because lower economic growth could reduce income tax receipts, says Knightley. 'If there is weaker consumer activity and weaker jobs, we're going to get less revenue from other sources. If the economy starts losing jobs, we're going to get less payroll tax revenue.' While tax cuts for ordinary citizens could offset some of the economic toll from higher tariffs, they will not be able to shield America from an incoming economic tornado of higher inflation, a slump in spending, job losses and the increasingly likely prospect of recession. Or in other words, Trump could simply be shooting himself in the foot.
