Accounting

Trump’s growing focus on tariff revenue raises trade war odds

Published

1 year ago

February 21, 2025

President Donald Trump and his economic team are increasingly focusing on the revenues his tariffs would generate as he seeks to get tax cuts through Congress, pointing to an ominous path ahead for countries trying to avoid a trade war.

Trump needs as much revenue as he can get as Republicans in Congress are working to iron out a plan to extend the 2017 tax cuts that are due to expire later this year, along with additional cuts, at an overall cost of $4.5 trillion over the next 10 years.

The White House has touted using tariffs for everything from reducing trade imbalances to increasing leverage over countries to hammer out deals. Economists question Trump’s logic, warning that tariffs will lead to slower growth and thus declining government revenues while also prompting retaliation from other nations.

But comments by Trump and his top economic advisors on Thursday showcased their growing emphasis on using tariffs as an income generator for the government.

In a social media post, Trump pointed to “lots of money coming in from tariffs” as a way to help balance the federal budget, which is projected to have a roughly $2 trillion deficit this fiscal year. That followed the president’s declaration Wednesday evening that the government would be taking in “tremendous tariff money.”

Another part of the revenue answer, according to the Trump administration, is spending cuts being identified by Elon Musk and his Department of Government Efficiency, which so far claims to have found some $55 billion in savings, although questions have been raised about that total.

Increasingly, though, the White House is talking up the lengthening list of tariffs that Trump has rolled out or threatened.

Speaking to reporters on Thursday, Kevin Hassett, head of Trump’s National Economic Council, said a 10% levy on imports from China introduced earlier this month would generate “between $500 billion and a trillion dollars over 10 years.”

Separately, Commerce Secretary Howard Lutnick told Fox Business that an order by Trump to impose “reciprocal” tariffs aimed at other economies’ tax and regulatory barriers alone could “earn us $700 billion a year.” Trump’s trade czar added those funds would help eliminate the budget deficit and cause interest rates to “come smashing down” with the result being that “the whole economy explodes higher.”

Tariff throwback

The U.S. depended on tariffs as the major source of government revenues through the 19th century, which Trump has pointed to as inspiration for his belief in the revenue-generating powers of import duties.

But the federal government was much smaller then and everything changed with the introduction of an income tax in 1913. Since the Second World War, tariffs have never generated much more than 2% of total federal revenue, according to a Congressional Research Service report published in January.

The U.S. imported $3.3 trillion in goods last year, according to official data, and are currently subject to an applied average of around 3%. In order to raise the $700 billion Lutnick projected, new tariffs would have to rise significantly.

If maximizing revenues was the goal, a U.S. tariff rate approaching 50% would be optimal and result in $780 billion in revenues, economists at the Peterson Institute for International Economics calculated last year. But that figure would go down over time as trade patterns shifted and the economy slowed, wrote economists Kim Clausing and Maurice Obstfeld.

Pursuing that as policy in the longer term “would actually lose revenue because of the contractionary consequences of such high tariffs,” the economists said.

Since the 1930s, U.S. trade policy has mostly focused on lowering tariffs in order to convince other countries to do the same, while opening up new markets for U.S. goods.

Trump and his supporters argue that hasn’t worked and point to China’s rise as the world’s manufacturing superpower as evidence.

“It’s a huge departure” from decades of U.S. trade policy and one that could lead to higher prices and slower growth, said Mary Lovely, another economist at the Peterson Institute.

It could also backfire politically, she said. President William McKinley ultimately changed his mind on tariffs after what amounted to a working-class revolt against higher prices. That episode set the stage for the shift to income taxes.

Trump and his aides are pitching the tariffs as a tax paid by other countries. But studies show they are typically paid by U.S. importers with the cost often passed on to consumers.

In the wake of the 2024 election in which inflation was a big driver of Trump’s victory, “those reasons to not like a tariff still exist very much,” Lovely said.

Fiscal priority

Republicans in Congress are receptive to the idea of higher tariff revenues in the short term, even if there are questions about how they can factor them into their accounting under the rules they have to abide by to expedite passage of a tax bill.

“When you care about the fiscal health of the nation as a whole, you have to look at the possible influx of future revenues that could come from the president’s trade proposals,” Representative Jason Smith, chairman of the influential Ways and Means Committee told Bloomberg Television in February.

That domestic priority is likely to compete with any plans Trump may have to also use tariffs as a tool for economic diplomacy.

Focusing on revenues could also create an entirely new dynamic for U.S. trade officials used to zeroing in on lowering trade barriers rather than generating income, said Daniel Mullaney, a former top U.S. trade negotiator now at the Atlantic Council think-tank. Though that is how many developing countries like India have historically approached negotiations, he said.

“That’s the new part,” Mullaney said. “Now we are considering the tariffs and lowering tariffs as revenue foregone and raising tariffs as revenue coming in.”

If raising revenues is Trump’s real tariff priority, it would make it very hard for the European Union and U.S. to avoid an escalating trade war in the months to come, said Ignacio Garcia Bercero, a former EU trade negotiator, now at think-tank Bruegel.

“That’s not good from the European perspective,” he said. “It’s clear that all of this suggests that there is not really much that you can actually negotiate.”

Accounting

FASB Standardizes Carbon Offsets Accounting Rules

Published

1 day ago

July 27, 2026

Business Finance News

FASB Standardizes Carbon Offsets Accounting Rules

In a decisive move toward standardized environmental financial reporting, accounting standards boards issued updated implementation guidance during the week ending July 25, 2026, regarding the formal recognition and valuation of corporate carbon offsets and environmental credits. The revised frameworks establish precise rules for how enterprises must measure, record, and disclose carbon credits on balance sheets, eliminating years of inconsistent reporting practices across public capital markets.

Under the finalized accounting standard, purchased carbon offsets can no longer be categorized under vague administrative expenses or unstandardized intangible asset accounts. Instead, organizations must classify environmental credits based on underlying operational intent—distinguishing between credits held for immediate compliance compliance obligations, long-term offset obligations, or active market trading. Furthermore, companies are required to evaluate carbon holdings for fair value impairment at the end of each reporting period, ensuring that depreciated or low-quality environmental credits do not distort corporate asset values.

The standardized rules carry significant implications for corporate audit committees and chief accounting officers. External audit firms are implementing rigorous verification protocols to validate the physical legitimacy, legal ownership, and scientific permanence of carbon credits claimed on balance sheets. Inaccurate or overstated carbon accounting claims now carry substantial financial litigation risk, alongside potential regulatory enforcement for misleading ESG disclosures.

To remain fully compliant, corporate accounting departments must establish centralized carbon tracking systems integrated into primary standard ERP ledgers. Accounting teams that proactively adopt standardized environmental reporting protocols will build investor credibility, streamline annual audit processes, and insulate their organizations against evolving regulatory scrutiny.

Accounting

Automated Tax Compliance Tools Reduce Risk

Published

1 day ago

July 27, 2026

Business Finance News

Automated Tax Compliance Tools Reduce Risk

Corporate tax departments reached a critical juncture in automated operational management. With nations worldwide rapidly enacting digital service taxes, localized value-added tax (VAT) mandates, and real-time electronic invoicing requirements, manual tax calculations have become obsolete. Modern corporate tax divisions are aggressively deploying AI-driven tax engine software to automate complex cross-border indirect tax calculations in real time.

The imperative for automated tax compliance stems from the sheer complexity of current trade policies and multi-jurisdictional commerce. E-commerce platforms, software vendors, and global manufacturers face constantly changing regional tax rates, statutory exemption rules, and cross-border tariff structures. Automated tax engines embed directly into enterprise enterprise resource planning (ERP) architectures, automatically applying correct tax codes at the point of sale, calculating real-time withholding amounts, and generating compliant e-invoices.

Automated audit trail generation represents another key advantage of modern tax tech integration. Advanced compliance platforms log every transactional tax determination on immutable digital ledgers, providing tax authorities with transparent, self-verifying audit trails. This capability drastically reduces the operational duration and administrative cost of corporate tax audits, protecting enterprises against severe penalties resulting from calculation errors or missed reporting deadlines.

For chief financial officers and tax directors, investing in automated tax compliance is a vital operational risk mitigation strategy. Automating routine tax calculations frees high-level accounting professionals to focus on strategic tax planning, transfer pricing optimization, and risk management in an increasingly complex global economic environment.

Accounting

Continuous Auditing Transforms Corporate ERPs

Published

7 days ago

July 21, 2026

Business Finance News

continuous auditing transforms corporate erps

As corporate accounting departments cross the threshold into late July 2026, the adoption of continuous, automated auditing systems has reached a definitive turning point. Driven by advances in artificial intelligence and deep integration with modern Enterprise Resource Planning (ERP) platforms, leading finance organizations are moving away from traditional, periodic post-hoc audits in favor of real-time, 100% transactional verification. This technological transition is redefining internal control environments, reducing compliance costs, and eliminating the structural delays inherent in legacy quarterly closing processes.

Unlike traditional auditing frameworks that rely on statistical sampling—a process that inevitably leaves operational blind spots—continuous auditing software monitors operational data feeds continuously. Every purchase order, electronic invoice, payroll disbursement, and cross-border wire transfer is automatically cross-referenced against established corporate governance parameters, regulatory tax schedules, and anti-fraud algorithms in real time. Anomalies or unauthorized ledger entries are flagged instantly, allowing internal audit teams to investigate and remediate compliance gaps immediately rather than months after the close of a financial period.

The implications for executive financial management are far-reaching. By embedding continuous verification directly into daily transaction workflows, chief financial officers gain uninterrupted visibility into the organization’s true financial standing. Real-time balance sheet auditing eliminates the severe operational bottlenecks associated with month-end and quarter-end financial reconciliations, freeing accounting professionals to focus on strategic financial modeling, tax planning, and capital allocation rather than manual data entry and spreadsheet consolidation.

However, implementing continuous auditing requires accounting leadership to invest heavily in data governance and technical upskilling. Internal audit teams must evolve from manual ledger reviewers into system architects capable of auditing complex algorithms and validating automated data pipelines. Accounting firms and corporate controllers that master continuous auditing will establish a resilient compliance framework capable of meeting stringent international regulatory standards with total transparency.