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Trump to reshape US economy with tariffs, crackdown on migrants

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Donald Trump is returning to the White House, and the U.S. economy is in for a wild ride.

The former and soon-to-be next president has promised an escalation of tariffs on all U.S. imports and the biggest mass deportation of migrants in history. He also wants a say in Federal Reserve policy. Many economists reckon the platform adds up to higher inflation and slower growth ahead.

Trump also promised sweeping tax cuts during the campaign that culminated in his victory over Vice President Kamala Harris. His ability to deliver them may hinge on the outcome of a House contest that remains in doubt, even as Republicans won control of the Senate. A divided government would require the new president to bargain more intensively with Congress over fiscal policy.

Donald Trump during an election night event in West Palm Beach, Florida
Donald Trump during an election night event in West Palm Beach, Florida

Win McNamee/Photographer: Win McNamee/Getty

Still, it’s Trump’s tariffs — which he’s threatened to slap on adversaries and allies alike — that stand to have the biggest impact on the U.S. economy, analysts say. The self-proclaimed “tariff man” enacted duties on about $380 billion in imports in his first term. Now he’s promising much wider measures, including a 10% to 20% charge on all imported goods and 60% on Chinese products. 

Trump says the import taxes can help raise revenue, as well as reduce U.S. trade deficits and re-shore manufacturing. What’s more, as Trump demonstrated last time he was in office, a president can enact tariffs essentially single-handedly. 

“He’s going to be off and running,” said Mark Zandi, chief economist at Moody’s Analytics. “I think we’re going to get these policies in place very quickly and they’re going to have impact immediately.”

Most economists say inflation will rise as a result, because consumers will pay higher costs that are passed on by importers who pay the tariffs.

Moody’s predicted before the vote that with Trump as president inflation would rise to at least 3% next year — and even higher in the event of a GOP sweep — from 2.4% in September, fueled by higher tariffs and an outflow of migrant labor. If targeted countries retaliate and a trade war ensues, the US will face “a modest stagflationary shock,” Wells Fargo economist Jay Bryson said in an Oct. 16 webinar, a situation in which economic output stalls and price pressures rise. 

‘Winners and losers’

Such a scenario will put the Federal Reserve in the position of wanting to raise interest rates to combat inflation, but also to cut rates to prevent the risk of a recession, said Jason Furman, the former head of the White House Council of Economic Advisers under President Barack Obama.

“In economics, everything has winners and losers,” Furman said in an Oct. 17 webinar. “In this case, the losers are consumers and most businesses.”

Trump will likely have thoughts on how the central bank should respond. He told Bloomberg News he should have a “say” on interest rates, “because I think I have very good instincts.” Pressure on the Fed during a second Trump term would worry investors, because history suggests countries that allow politicians to direct monetary policy are likely to face higher inflation.

In general, Trump and his supporters dismiss the downbeat projections from “Wall Street elites.” They point out that inflation didn’t spike in his first term while he enacted tariffs and tax cuts — and presided over robust economic growth, until the pandemic hit.

The Coalition for a Prosperous America, which supports trade protectionism, estimated that a 10% “universal” tariff, combined with income-tax cuts that Trump is promising, would add more than $700 billion to economic output and create 2.8 million additional jobs.

‘Loosening up’

Michael Faulkender, chief economist at the America First Policy Institute that’s staffed with officials from Trump’s first administration, said the negative projections don’t account for the economic growth that Trump’s deregulatory agenda and plans to boost energy production would generate.

“There’s a lot of loosening up of our economy, removing structural costs in our economy, that can generate growth in an actually deflationary way,” Faulkender said.

Trump promised to make permanent the tax cuts he pushed through in 2017 for households, small businesses and the estates of wealthy individuals — most of which are due to expire at the end of 2025. Even if the GOP loses its sway over the House, there’s likely some room to strike a deal with Democrats, who also favor keeping some of those measures in place. 

Any such bargaining will take place under the pressure of another looming debt-ceiling showdown, with borrowing limits set to kick in again next year under a deal to resolve a 2023 standoff. Congress-watchers see other areas for potential agreement, because some — like a tax-credit for childcare and an exemption for tips — were backed by both parties during the campaign. But some of Trump’s proposals, including further cuts in the corporate tax rate, would likely be off the table if Republicans lose the House. 

The tax and spending promises that the Trump campaign rolled out during the election could collectively cost more than $10 trillion over a decade, according to Bloomberg News calculations. Trump said he’d use tariff revenues to help pay for them, but economists at the Peterson Institute estimate that the import duties could only raise a fraction of that sum.

Many economists also doubt that Trump’s trade policy can quickly boost manufacturing employment, one of the stated goals. It takes years to build factories, and automation means they nowadays require fewer workers.

A National Bureau of Economic Research study concluded that Trump’s past tariffs failed to increase jobs in protected industries, while hurting jobs in other sectors that got caught up in the trade war.

“The tariffs are not going to bring down the trade deficit, they’re not going to restore manufacturing jobs, but it’ll take several years to discover that and a lot of pain in between,” Maurice Obstfeld, formerly a chief economist at the International Monetary Fund, said in an Oct. 17 webinar.

‘Significant chaos’

Trump’s threat to deport millions of undocumented migrants is another source of alarm to many economists and businesses. It would reduce the labor pool available to companies that have found it hard to hire. 

Deporting post-2020 arrivals would shrink the economy by some 3% by the next election in 2028, while the drop in demand from a smaller population would lower prices, Bloomberg Economics’ Chris Collins wrote in a note. The impact would likely land hardest in industries like construction, leisure and hospitality — and states including Texas, Florida and California — where migrants make up the biggest share of the labor force.

Of course, campaign pledges often fall by the wayside, and the economic impact of Trump’s second-term policies will depend on which ones he prioritizes and can get done.

Many doubt that deportations of migrants are feasible on the scale Trump has proposed. He’s floated using the U.S. Immigration and Customs Enforcement or even the Alien Enemies Act of 1798 — used to justify World War II-era internment of noncitizens — to carry out the plan, which would likely face court challenges.

As for tariffs, Trump himself has indicated the numbers he floats are often intended as bargaining levers. But even the threat of tariffs will be disruptive as companies scramble to renegotiate contracts and reconfigure supply chains to get ahead of the potential duties, said Wendy Edelberg, director of the Brookings Institution’s Hamilton Project. 

“We’re going to see this significant chaos across the entire business landscape,” she said.

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IAASB tweaks standards on working with outside experts

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The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

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Tariffs will hit low-income Americans harder than richest, report says

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President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

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