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Trump widens trade fight to include global taxes, regulation

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President Donald Trump is embarking on what may be his most disruptive action yet for the global economy by broadening his grievances to how other countries choose to tax and regulate.

Trump on Thursday ordered top economic officials to calculate new U.S. tariffs based on the total tariffs and tax, regulatory, currency and any other barriers that U.S. exports face. The new “reciprocal” duties would be calculated country by country. They will be laid out in a series of reports due by April 1 that officials said would first examine the economies with which the U.S. has the largest trade deficits.

“The numbers are going to be very fair but staggering. They’re going to be large,” Trump told reporters in the Oval Office as he signed a memorandum ordering up the new tariffs.

The move, which Trump said would replace his campaign plan for a universal tariff on imports, immediately puts the European Union and countries including China, India, Mexico and Vietnam in the potential firing line, based on U.S. trade data.

European Commission President Ursula von der Leyen on Friday called Trump’s plan a “step in the wrong direction” and an act of self-harm. By raising tariffs, the U.S. “is taxing its own citizens, raising costs for business, stifling growth and fueling inflation,” she said.

Reaction was swift from other major U.S. trading partners. During a joint conference with Indian Prime Minister Narendra Modi on Thursday, Trump said the two countries would start trade negotiations. Indian officials Friday said they’re looking to boost oil and gas imports from the U.S. — a vow that countries from Japan to Vietnam have already made.

Asian exporters

In Tokyo on Friday, Japan also said it’s reaching out to Washington to start discussions. Taiwanese President Lai Ching-te pledged to boost military spending in a sign of further cooperation with the US against China. South Korea— which along with Japan was singled out by a White House official on a call with reporters — released a statement highlighting the low effective tariff rate on U.S. goods.

Trump’s plan would, if implemented, mark a departure from how the U.S. has approached tariffs for almost a century and deal a major blow to global trading rules now based on countries granting each other what are known as “most favored nation” tariffs unless they sign special trade deals. It would also turn the definition on its head — reciprocity has up until now referred to lower tariffs on goods.

“Trump is essentially trying to create a justification to impose high tariffs on whoever he wants,” said Sam Lowe, a partner at Flint Global in London, where he heads their trade and market access practice.

Fundamental change, Trump advisers said, is what’s needed. “The idea here is historic and it’s really about a revolution in how the international trading system is organized,” Peter Navarro, a senior trade adviser, told Bloomberg Television.  

With his order Trump is also reaching beyond the usual boundaries of his trade fights to how countries collect taxes, apply regulations and standards, and other so-called non-tariff barriers. 

Trump singled out the use of value-added taxes, which he and his advisors argue give exporters from other countries an unfair advantage over U.S. ones. More than 160 countries in the world use VAT or similar consumption levies, according to the International Monetary Fund. The U.S., however, bases its national taxes on income.

In the EU and other economies that use them, Trump and his advisors argue, the ability to claim a VAT rebate when products are exported gives European companies an unfair advantage as imports from the U.S. are charged VAT of 15-20% or higher depending on the member country. 

“A VAT tax is a tariff,” Trump told reporters Thursday. 

Many economists disagree. “Defining a VAT to be a trade barrier isn’t just questionable economics (the VAT is the same on imports and domestic production), it also basically forecloses negotiation, as the EU and others aren’t in a fiscal position to negotiate away its tax base,” Brad Setser, a senior fellow at the Council on Foreign Relations and a former US Treasury official, wrote on X. 

In a note to clients, Paul Ashworth, chief North America economist at Capital Economics, said Trump’s plan was likely to have a more damaging impact on the U.S. economy than his previous universal tariff idea.

Just adding the average most-favored nation tariff rate of countries to their VATs would lead to significant reciprocal U.S. tariffs on some of the U.S.’s top trading partners, he wrote. If the U.S. imposes reciprocal tariffs that add VAT rates and MFN tariff rates together, the countries most hit would be India with a rate of 29%, Brazil and the EU. 

Such duties alone, Ashworth wrote, would lead to an increase in the average effective tariffs rate on all U.S. imports from 3% currently to around 20%. It would also lead to a temporary rebound in U.S. inflation to around 4% later this year.

The EU stipulates that countries must apply a VAT rate of no less than 15% on most goods and services, though it leaves decisions on actual levels and exemptions to member states. According to ING calculations, the VAT across the 27-nation bloc averaged 21.5% in 2023.

By targeting VAT the U.S. is relaunching a long-running trade fight. 

The U.S. and Europe have battled over the treatment of VAT and income taxes in global trading rules since the 1960s with the EU challenging multiple mechanisms the U.S. set up in the 1970s and ’80s to offer a similar export rebate on U.S. corporate taxes levied against revenues. The EU eventually won a World Trade Organization challenge to those mechanisms in the 1990s and since then the U.S. has had no similar export rebates. 

Erica York, vice president of federal tax policy at the nonpartisan Tax Foundation, said the Trump administration’s view of VAT reflects a fundamental misunderstanding of how the tax works. VATs don’t discriminate against foreign goods since domestically produced ones face the same taxes in the countries they are sold, she said.

Consumption taxes

“The goal of a value-added tax is to tax domestic consumption,” York said. “There’s no discrimination based on where something was made. It’s just a tax on the stuff that people in a country are buying.”

But Trump’s grievances with other countries go beyond that by targeting regulations and other non-tariff barriers that U.S. goods face overseas. 

“We’re going to look at everything,” Jamieson Greer, who is due to become U.S. Trade Representative, told reporters on Thursday, including what he called “fake” anti-trust regimes. 

The EU has for years targeted U.S. tech giants like Apple Inc. and Alphabet Inc.’s Google for scrutiny in competition investigations that have led to hefty fines. The U.S. has also long complained about how the EU and other countries like Japan regulate food imports such as beef and chicken, as well as other U.S. exports like chemicals and genetically modified crop seeds.

In the memorandum signed Thursday, Trump ordered officials to include in their tariff calculations “any other practice that” they conclude “imposes any unfair limitation on market access or any structural impediment to fair competition with the market economy of the United States.” 

As with many of Trump’s trade actions, optimists believe that they could lead to trade agreements that will avoid the disruptive economic impact of tariffs likely to provoke retaliation by other countries and lead to higher prices and slower growth. 

John Veroneau, a partner at law firm Covington & Burling LLP who served as a senior trade official in the administration of President George W. Bush, said Trump’s latest move represents a significant broadening out of his trade conflicts. 

“He has raised the stakes. This is now a global enterprise,” Veroneau said, calling it a “huge step” away from the global trading rules first laid out in the 1947 General Agreement on Tariffs and Trade. 

‘New phase’

The U.S. is signaling “the start of a new phase in global trade” in which the U.S. uses its power not to influence global rules but the bilateral trade in goods, he said. The best hope, Veroneau said, is that the U.S. can negotiate new deals that don’t lead to escalating trade wars over tariffs.

Equities rose in Asia and Europe on Friday, with traders optimistic that the timeline for reciprocal tariffs provided enough room to negotiate. Setser said that shouldn’t last long as investors “will eventually realize that this is a path to real tariff hikes,” he wrote on X. 

Jennifer Hillman, who served as both a senior U.S. trade official and a member of the WTO’s highest court, said the plan laid out by Trump and his advisors would be immensely complex to implement, would likely to lead to chaos and require more funding for border authorities

Interfering in how other countries collect taxes and impose regulations would also inevitably lead to a backlash against the U.S., said Hillman, now a senior fellow at the Council of Foreign Relations.

“We’re just going to make America hated again,” she said. “At some level, for these other countries, it’s just like ‘who are you to tell us that we can’t regulate our own economy?'”

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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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