Accounting
Trump’s tariffs raise tax-cut stakes with recession fears rising
President Donald Trump’s much bigger-than-expected tariff hikes increase the urgency of the Republican tax-cut package now in negotiation, while threatening to undermine its boost to business and consumer confidence.
With the biggest selloff on Wall Street since the COVID crisis showcasing investor concerns about Trump’s plans to jack up U.S. tariffs against all trading partners, the stakes are now higher for the GOP tax package. A simple extension of the 2017 income-tax cuts that are set to expire at the end of this year would offer no new fiscal stimulus.
“The main question is what do they do that goes beyond extending the 2017 cuts?” said Alec Phillips, chief U.S. political economist at Goldman Sachs Group Inc. “The tariffs that are being discussed look like they are on a larger scale than the net tax cut that seems to be under consideration in Congress.”
Republicans appear aware of the potential trade-off. Senate GOP members this week unveiled a budget blueprint that provided for
The White House chief economist, Stephen Miran, also argued on Friday that the administration’s planned wave of deregulation will have a “powerful, and arguably
But the danger is the ramp-up in import levies tips the economy into a downward spiral that makes it tough for tax cuts, a reduced regulatory burden and even lower interest rates to quickly reverse. Bloomberg Economics estimated that, with the panoply of measures Trump has announced, the average U.S. tariff rate is poised to climb to almost 22%, or the highest in roughly a century.
The tariffs aren’t yet fully in place, and may be subject to negotiation. If they do proceed, most economists see a sizable boost to inflation. Federal Reserve Chair Jerome Powell Friday said the price effects could be temporary, or prove “more persistent.” With wage growth slowing, that implies a hit to household incomes. A consumption hit could in turn spur employers to lay off staff and curb investment — even in an environment of cheaper borrowing costs.
“Large shocks are usually associated with nonlinear effects and unintended consequences,” JPMorgan Chase & Co. economists led by Bruce Kasman wrote in a note to clients Thursday. The bank on Friday changed its call on the economic outlook and now sees the U.S.
Then there’s the timing issue. The most powerful wave of tariff hikes yet is set to take effect April 9. But the tax-cut legislation is likely months away from passage. Bessent highlighted in a Bloomberg TV interview Wednesday that the Republicans have never been more united. Even so, the so-called reconciliation bill that Republicans are using to bypass Democrats involves a complicated process, requiring many steps before it’s enacted.
And even then, the tax relief is for next year’s income, while the tariff-related risks are surging in the here-and-now.
“Whatever fiscal oomph that we may get is probably a 2026 reality, whereas the trade policy uncertainty is a headwind to growth is a 2025 reality,” said Richard Clarida, managing director and global economic adviser at Pacific Investment Management Co. and a former Treasury official in the George W. Bush administration. “In the narrow, limiting case, where you don’t do anything on tax on tips or this or that, then there’s essentially no real net stimulus.”
Bessent has repeatedly emphasized that the Trump administration’s priority is Main Street, not Wall Street, and he and the president have embraced the idea of a transition period to where the economy is propelled by the private-sector — rather than the government-led growth pattern they say prevailed under Joe Biden. High import levies could also offer a path toward better trade deals.
“Is this ugly right now? Is this distasteful? Absolutely,” said Phil Orlando, chief market strategist at the asset manager Federated Hermes. “But it was exactly the sort of thing they needed to do in order to get everyone’s attention and start to have a series of negotiations to try to level that playing field and boost economic growth through more normalized trade.”
The tariffs in the meantime will be bringing in fresh revenue to the government, which — while it cannot count toward paying for the tax cuts according to reconciliation-bill rules — may help reduce the outsize federal budget deficit. Bessent has estimated the tariff income at $300 billion to $600 billion a year.
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The Tax Foundation, a policy think tank, has estimated the announced tariffs will impose an average tax hike of over
The tariffs are “highly damaging and primarily burden low and middle income families,” said Samantha Jacoby, deputy director of federal tax policy at the Center on Budget and Policy Priorities. “Small targeted tax cuts for low income or middle income families doesn’t change that.”
A Republican attempt to block states from enforcing new artificial intelligence rules over the next decade has drawn growing bipartisan objections, exposing tension in Washington over allowing for more unchecked AI development.
The proposal, buried on pages 278 and 279 in the sweeping tax bill passed by the House last month, has drawn sharp criticism from Republican Representative Marjorie Taylor Greene and Senator Marsha Blackburn, as well as Democratic Senators Ed Markey and Elizabeth Warren. More than 200 state lawmakers from both parties also urged Congress this week to scrap the measure.
“We have no idea what AI will be capable of in the next 10 years,” Greene
Markey and Warren have also been forceful in pushing back against the measure, arguing that it violates Senate rules that bill language included in the budget reconciliation process must relate to spending. “This backdoor AI moratorium is not serious. It’s not responsible. And it’s not acceptable,” Markey said. Meanwhile, Senate Commerce Chair Ted Cruz (R-Texas) has said he’s “not certain if that provision will survive,” though he has expressed support for it.
Since returning to the White House, President Donald Trump has taken steps to
But bipartisan resistance to the proposed moratorium on AI rules highlights a fierce divide in Washington over how much to let the industry regulate itself.
Congress has yet to pass a federal framework on AI, which has effectively left the states to take the lead on figuring out how to set rules around the technology. California, New York, Utah and dozens of others have introduced or enacted AI laws in recent years, including bills to address concerns about data privacy, copyright and bias raised by the technology.
If Congress backs away from the proposal, it would mark a setback for top AI developers. In March, OpenAI asked the White House to
So far, the leading AI companies have largely stayed quiet as the fight over the measure plays out. Meta Platforms Inc. declined to comment. Alphabet Inc.’s Google didn’t respond to a request for comment. OpenAI declined to comment beyond its previous policy suggestions.
TechNet, a trade group representing Google, OpenAI and other tech companies, echoed the ChatGPT maker’s concerns about the “developing patchwork” of state AI bills. “In 2025, over 1000 AI bills have been introduced in state legislatures — many containing incompatible rules and requirements,” Linda Moore, chief executive officer of TechNet, said in a statement to Bloomberg News. “A consistent national approach is critical,” she added, to address AI risks and “ensure America remains the global leader in innovation for generations to come.”
Anthropic, a safety-focused AI startup that has called for more regulation generally,
“Ten years is a long time,” Anthropic CEO Dario Amodei said at the company’s developer conference on May 22, speaking about the moratorium. “It’s one thing to say, ‘We don’t have to grab the steering wheel now.’ It’s another thing to say, ‘We’re going to rip out the steering wheel and we can’t put it back in for 10 years.'”
Some Republican senators have raised doubts that the AI provision can pass through the reconciliation process, but this camp has also expressed support for an interim ban on state rules to avoid an overly fragmented and complex regulatory landscape.
“I wouldn’t put my money on anything right now until it actually passes,” John Curtis, a Republican senator from Utah, previously
State legislators, however, worry that the provision would rob them of the ability to protect their constituents from the rapidly evolving technology.
“Over the next decade, AI will raise some of the most important public policy questions of our time,” state lawmakers from 49 states wrote in a
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This week’s stats focus in part on the job titles seeing the greatest losses at the IRS during layoffs; as well as the states that have proposed or passed alternatives to the 150-hour rule; the percentage of master’s in accounting program applicants since 2020; the number of PwC employees laid off in May; the projected size of Deloitte’s new New York City headquarters; and the amount of 2026 HSA annual contribution limits, depending on coverage.
CrowdStrike Holdings Inc. said U.S. officials have asked for information related to the accounting of deals it’s made with some customers and said the cybersecurity firm is cooperating with the inquiry.
The Austin, Texas-based company said in a filing Wednesday that it has gotten “requests for information” from the U.S. Department of Justice and the Securities and Exchange Commission “relating to the company’s recognition of revenue and reporting of ARR for transactions with certain customers.” ARR refers to annual recurring revenue, a measure of earnings from subscriptions.
The company said the federal officials have also sought information related to a CrowdStrike update last year that crashed Windows operating systems around the world.
“The company is cooperating and providing information in response to these requests,” the filing states.
U.S. prosecutors and regulators have been investigating a $32 million deal between CrowdStrike and a technology distributor, Carahsoft Technology Corp., to provide cybersecurity tools to the Internal Revenue Service, Bloomberg News first reported in February. The IRS never purchased or received the products, Bloomberg News
The investigators are probing what senior CrowdStrike executives may have known about the $32 million deal and are examining other transactions made by the cybersecurity firm, Bloomberg News
Asked for comment about the filing, CrowdStrike spokesperson Brian Merrill said, “As we have told Bloomberg repeatedly, this is old news and we stand by the accounting of the transaction.”
A lawyer for Carahsoft previously declined to comment on the federal investigations, and representatives didn’t respond to subsequent requests for comment about them.
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