Personal Finance
The levies push limits of presidential authority
U.S. President Donald Trump addresses the Conservative Political Action Conference (CPAC) annual meeting in National Harbor, Maryland, U.S., February 22, 2025.
Brian Snyder | Reuters
U.S. importers and their customers are about to experience the full force of President Donald Trump’s unprecedented use of emergency economic powers.
To that point, 25% tariffs on imports from America’s top two trading partners, Canada and Mexico, went into effect at midnight Tuesday, as did an additional 10% tariff on Chinese imports. Canadian energy will be tariffed at a lower rate of 10%, also as of midnight Tuesday.
It’s difficult to overstate how far-reaching the impact of these tariffs will be, or how quickly they will be felt.
U.S. trade with Mexico, Canada and China last year accounted for around 40% of America’s total commerce in goods around the world.
And unlike traditional trade policy, these tariffs are designed to deliver a financial sting right away, trade experts told CNBC.
“From a technical standpoint, the imposition of the tariffs is basically a light switch. They’re on or they’re off,” said Daniel Anthony, the president of Trade Partnership Worldwide, a policy research firm.
Literally overnight, the cost of importing, for example, $100,000 worth of limes from Mexico increased by $25,000 Tuesday. This is money that the importer will need to pay directly to U.S. Customs and Border Protection when the limes cross the border.
Target CEO Brian Cornell told investors Tuesday that shoppers could see produce prices rise within days, the result of tariffs on Mexican fruits and vegetables.
Even if a glitch prevented tariffs from being collected starting at exactly 12:01am Eastern Time Tuesday, they would still be tallied, and importers could expect to receive a tax bill retroactively, said Nicole Bivens Collinson, a Washington trade lobbyist and managing principal at Sandler, Travis & Rosenberg.
“It’s like when you get an Uber bill and you forgot to tip, and add it on later,” she said.
Along with the two new North American tariff rates, Trump also signed an order Monday doubling his earlier 10% tariff on imports from China, for a total 20% additional tariff rate on the nation.
Taken together, Canada, China and Mexico accounted for $2.2 trillion worth of U.S. overseas trade in 2024, according to federal census data. About $840 billion of that came from trade with Mexico, $762 billion from Canadian imports and exports and $582 billion from China.
Extraordinary power
Container at the Port of Vancouver in Vancouver, British Columbia, Canada, on Feb. 28, 2025.
Ethan Cairns/Bloomberg via Getty Images
Part of the reason Trump could do this so quickly is because the White House is invoking a sweeping national security law to justify the new levies.
Until now, the International Emergency Economic Powers Act, IEEPA, had been used mainly to impose emergency sanctions on foreign dictators or suspected terrorist groups.
But the Trump administration argues that the illicit global fentanyl trade and immigrants at the Mexican border both qualify as “unusual and extraordinary” foreign threats to American national security, justifying Trump’s use of emergency powers under IEEPA.
Trump is using the law in a broader way than any president has before, Trade Partnership Worldwide’s Anthony explained.
Trump is also inviting legal challenges, he said, by pushing the boundaries of presidential authority.
For now, consumers will bear the brunt of the tariffs in higher prices, experts say. The Tax Policy Center estimates that Trump’s Mexico and Canada tariffs alone will cost the average household an additional $930 a year by 2026.
The imposition of massive new tariffs on U.S. imports from Canada, China and Mexico are a sharp reminder of how much power Trump wields over global commerce.
But they also hint at the limitations of this power.
In the case of so-called de-minimis shipments, the Trump administration imposed new levies on millions of shipments entering the United States, before the federal government had the means to actually collect the fees.
The de minimis mess
Oscar Wong | Moment | Getty Images
So-called “de minimis” imports are international shipments valued at $800 or less. Historically, these low-value, person-to-person imports have been exempt from U.S. tariffs.
Several of the world’s biggest e-commerce companies take advantage of the de-minimis loophole by shipping their products directly to consumers from overseas.
Fast fashion sites, like Temu and Shein, ship goods directly from China to American consumers. They have helped fuel an explosion in U.S.-bound de-minimis shipments in recent years.
But collecting tariffs on de-minimis goods is harder than it looks.
“There’s a whole infrastructure system set up for normal shipments that come in to the country,” said Collinson, who previously served as a U.S. trade negotiator. But this system doesn’t exist for de-minimis imports, she added.
Last year alone, the U.S. accepted more than 1.3 billion overseas shipments that qualified for de-minimis tariff exemptions, according to federal data.
To process that many new shipments, the federal government will need to hire more customs agents, experts said.
Nonetheless, in early February Trump announced that the United States would begin collecting tariffs on low-value shipments from overseas.
Trump’s order gave the U.S. Postal Service mere days to implement a system to begin collecting tariffs on millions of small packages every day.
It also sowed chaos throughout the international postal system, culminating on Feb. 4 with an announcement that USPS had suspended all parcel delivery services from China and Hong Kong “until further notice.”
A day later, the postal service reversed course and resumed processing the de-minimis parcels. But it did not collect any tariffs on them.
Soon after, the Trump administration issued an amendment to the China order, formally delaying any effort to collect tariffs on de-minimis imports until “adequate systems are in place to fully and expediently process and collect tariff revenue” on them.
The U.S. Postal Service didn’t immediately respond to a request for comment.
A month later, the White House put similar de-minimis waivers in place Sunday for Canada and Mexico, ahead of imposing the new 25% tariffs.
It’s unclear when a de-minimis tariff collection system might be up and running.
A U.S. Customs and Border Protection spokeswoman told CNBC, “The dynamic nature of our mission, along with evolving threats and challenges, requires CBP to remain flexible and adapt quickly while ensuring seamless operations and mission resilience.”
But Anthony noted that the delay for China was “open ended.”
“Part of the challenge is [federal] personnel and bandwidth,” he said. Customs and Border Protection may not have the staff or resources available to handle the new volume of shipments and packages, he said.
Officials must also determine how the levy will be assessed and paid, and how customs officials will process tens of millions of new data points furnished by shippers for each individual package, the experts said.
“Anyone can develop a good policy, but whether that policy can actually be effectuated is critical,” Collinson said.
House Republicans on Thursday advanced President Donald Trump‘s “big, beautiful” tax and spending bill, which includes a bigger child tax credit for some families.
If enacted, the House bill would make permanent the maximum $2,000 credit passed via the Tax Cuts and Jobs Act, or TCJA, of 2017. Without action from Congress, that tax break will revert to $1,000 after 2025.
The House bill would make the highest child tax credit $2,500 from 2025 through 2028. After that, the credit’s top value would revert to $2,000 and be indexed for inflation.
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However, the House-approved child tax credit hike wouldn’t provide relief to the lowest-earning families, according to some policy experts.
The provision could still change in the Senate.
House Republicans child tax credit changes
If enacted, the House Republican bill could provide a maximum child tax credit of $2,500 per eligible kid, starting in 2025.
However, the plan does “nothing for the 17 million children that are left out of the current $2,000 credit,” Kris Cox, director of federal tax policy with the Center on Budget and Policy Priorities’ federal fiscal policy division, previously told CNBC.
Typically, very-low-income families with kids don’t owe federal taxes, which means they can’t claim the full child tax credit.
Plus, under the House proposal, both parents must have a Social Security number if filing jointly and claiming the tax break for an eligible child.
“This bill is taking the child tax credit away from 4.5 million children who are U.S. citizens or lawfully present,” Cox told CNBC.
How to calculate the child tax credit
For 2025, the child tax credit is currently worth up to $2,000 per qualifying child under age 17 with a valid Social Security number. Up to $1,700 is “refundable” for 2025, which delivers a maximum of $1,700 once the credit exceeds taxes owed.
After your first $2,500 of earnings, the child tax credit value is 15% of adjusted gross income, or AGI, until the tax break reaches that peak of $2,000 per child. The tax break starts to phase out once AGI exceeds $400,000 for married couples filing together or $200,000 for all other taxpayers.
“Almost everyone gets it,” but middle-income families currently see the biggest benefit, said Elaine Maag, senior fellow in the Urban-Brookings Tax Policy Center.
A bipartisan House bill passed in February 2024 aimed to expand access to the child tax credit and retroactively boosted the refundable portion for 2023, which would have impacted families during the 2024 filing season.
The bill failed in the Senate in August, but Republicans expressed interest in revisiting the issue.
At the time of the vote, Sen. Mike Crapo, R-Idaho, described it as a “blatant attempt to score political points.” Crapo, who is now chairman of the Senate Finance Committee, said in August that Senate Republicans have concerns about the policy, but are willing to negotiate a “child tax credit solution that a majority of Republicans can support.”
Although House Republicans previously supported the expansion for lower-earners, the current plan “shifts directions and focuses the benefits on middle and high-income families,” Maag said.
Chairman Jason Smith (R-MO) speaks during a House Committee on Ways and Means in the Longworth House Office Building on April 30, 2024 in Washington, D.C.
Anna Moneymaker | Getty Images News | Getty Images
House Republicans on Thursday advanced a multi-trillion-dollar tax and spending package that could have sweeping impacts on household finances.
If enacted, the legislation — called the “One Big Beautiful Bill Act” — could make permanent President Donald Trump‘s 2017 tax cuts, while adding new provisions that could significantly overhaul student borrowing, health savings accounts and car ownership, among other changes.
With control of Congress, Republicans can use “budget reconciliation” to pass the package, which only needs a simple majority in the Senate. But the bill, which is more than 1,000 pages long, is likely to see changes in the upper chamber before Trump signs it into law.
Here are some of the provisions that may affect your wallet.
Higher ‘SALT’ deduction limit
Enacted via the Tax Cuts and Jobs Act, or TCJA, of 2017, there’s currently a $10,000 limit on the deduction for state and local taxes, known as SALT. Filers must itemize deductions to claim it.
The bill would raise the SALT cap to $40,000 in 2025 and phase out the tax break for incomes over $500,000. The SALT limit and income phaseout would increase annually by 1% from 2026 through 2033.
Before TCJA, the SALT deduction was unlimited, but the so-called alternative minimum tax curbed the benefit for some wealthier Americans.
The bill would also reduce itemized deductions for certain taxpayers in the 37% income tax bracket, which could limit the benefit of the higher SALT cap.
“Any changes to lift the cap would primarily benefit higher earners,” Garrett Watson, director of policy analysis at the Tax Foundation, wrote in an analysis on Tuesday.
Bigger child tax credit
Trump’s 2017 tax cuts temporarily boosted the maximum child tax credit to $2,000 from $1,000, an increase that will expire after 2025 without action from Congress.
The House bill would make the $2,000 credit permanent and raise the cap to $2,500 from 2025 through 2028. After 2028, the credit’s highest value would revert to $2,000, and be indexed for inflation.
However, the plan does “nothing for the 17 million children that are left out of the current $2,000 credit,” Kris Cox, director of federal tax policy with the Center on Budget and Policy Priorities’ federal fiscal policy division, previously told CNBC.
The reason for that is that very-low-income families with kids typically don’t owe federal taxes, which means they can’t claim the full child tax credit.
Medicaid, SNAP cuts
To help pay for the tax relief in the bill, House Republicans have included roughly $1 trillion in cuts to Medicaid health coverage and the Supplemental Nutrition Assistance Program, or SNAP, that are the largest in the programs’ histories.
As a result of the changes in the bill, which include stricter work requirements to qualify for the programs, 14 million individuals may lose health coverage, while 3 million households may go without food assistance, according to Accountable.US, a nonpartisan watchdog group.
While Medicaid work requirements had been slated to go into effect in 2029 per earlier versions of the proposal, House lawmakers moved that date up to December 2026 in last-minute negotiations.
‘Bonus’ deduction for older adults
Catherine Delahaye | Digitalvision | Getty Images
Low- to middle-income seniors will be able to deduct an additional $4,000 on their tax returns, based on the terms of the House bill. The full deduction, dubbed a “bonus” in the legislation, would apply to individual tax filers with up to $75,000 in modified adjusted gross income and married couples with up to $150,000.
The tax deduction reduces the amount of seniors’ income subject to taxes, and therefore may also bring down the taxes that they owe.
The deduction is in lieu of the elimination of taxes on Social Security benefits, a proposal touted by Trump on the campaign trail. Changes to Social Security are prohibited in reconciliation legislation.
Health savings account expansions
There are many provisions in the GOP bill tied to HSAs, tax-advantaged accounts used to pay for health care. They carry powerful financial benefits for those with access.
The legislation aims to both expand households’ ability to contribute to HSAs and to use those funds without financial penalty, said William McBride, chief economist at the Tax Foundation. The HSA measures would kick in starting in 2026.
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One tweak allows households to use HSAs to pay for expenses tied to sports and fitness, like gym memberships or instruction. Eligible expenses are capped at $500 a year for individuals and $1,000 for couples.
The bill also doubles the annual contribution limits for low and middle earners, to $8,600 for individuals and $17,100 for married couples in 2025. (This applies to individuals who make less than $75,000 per year and $150,000 for married couples.)
New ‘Trump Accounts’ for child savings
MoMo Productions | Stone | Getty Images
Trump’s tax package also includes a new savings account for children with a one-time deposit of $1,000 from the federal government.
Funded by the Department of the Treasury, “Trump Accounts” — previously known as “Money Accounts for Growth and Advancement” or “MAGA Accounts” — can later be used for education expenses or credentials, the down payment on a first home or as capital to start a small business.
If the bill passes as drafted, parents will be able to contribute up to $5,000 a year and the balance will be invested in a diversified fund that tracks a U.S.-stock index. Earnings grow tax-deferred, and qualified withdrawals are taxed at the long-term capital-gains rate.
Reduced student loan benefits
The bill would eliminate subsidized federal student loans, meaning that the government would no longer cover the interest on the debt while borrowers are in school or during other key periods. The change could increase a student’s loan balance at graduation by about 15%, said higher education expert Mark Kantrowitz.
While the U.S. Department of Education’s current income-driven repayment plans for student loan borrowers typically conclude in debt forgiveness after 20 or 25 years, the new GOP plan wouldn’t lead to debt cancellation for 30 years in some cases.
“A 30-year repayment term means indentured servitude,” Kantrowitz said.
The legislation would also nix the unemployment deferment and economic hardship deferment, both of which student loan borrowers use to pause their payments during periods of financial difficulty.
Car loan interest deduction
Andresr | E+ | Getty Images
The bill creates a tax deduction for car owners who pay interest on an auto loan, for tax years 2025 through 2028.
The tax break is worth up to $10,000 for annual loan interest on passenger vehicles, such as a car, minivan, van, sport utility vehicle, pickup truck, motorcycle, all-terrain or recreational vehicle. It’s an above-the-line decoration, meaning taxpayers can get it even if they don’t itemize their tax deductions.
There are some restrictions: The deduction’s value starts to decrease when a taxpayer’s modified adjusted gross income exceeds $100,000, or $200,000 for married couples filing a joint tax return. Also, the car must be assembled in the U.S. to qualify for the tax break.
Tax break on tip income
Workers who receive tips could get a tax break under the bill, which exempts qualified tips from income tax through 2028. It’s limited to those who earn less than $160,000 for 2025.
The Senate unanimously passed a similar bill on Tuesday that would limit the tax break to $25,000.
EV, clean energy tax credits
The House bill would mean an early termination of tax breaks for consumers who buy or lease electric vehicles, and others for households that make their homes more energy-efficient.
Many of these credits have been available in some form for decades. The Biden-era Inflation Reduction Act extended or enhanced them.
The House legislation would end the tax breaks after 2025, with few exceptions, about seven years earlier than under current law.
Those on the chopping block include a $7,500 tax credit for new EVs and leases, and a $4,000 credit for used EVs.
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