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Trump tariffs could help clear the way for bigger tax cuts as Congress eyes a potential revenue windfall — and a shrinking economy

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  • President Donald Trump’s much higher-than-anticipated tariffs have crushed stocks but could raise a substantial amount of revenue, while shrinking the economy in the process. The import taxes could generate $700 billion a year in revenue. That could help clear the way in Congress for bigger income tax cuts, though the tariffs would also be the equivalent of a massive tax hike on consumers.

Wall Street suffered a massive case of sticker shock when President Donald Trump unveiled his latest round of tariffs on “Liberation Day,” wiping out $6 trillion in market cap.

But the flip side of the much higher-than-anticipated duties is a potential revenue windfall that could help clear the way for getting bigger tax cuts passed in Congress.

Lawmakers have already taken a key step toward that end. Early Saturday morning, Senate Republicans approved a framework to extend Trump’s tax cuts from his first term, add new cuts like ending taxes on Social Security income, and slash spending.

Some fiscal conservatives in the GOP have balked at the massive deficits and debt more tax cuts could bring. But economists at Citi Research said in a note on Thursday that the aggressive tariffs “may now become a justification for larger tax cuts.”

It’s unclear if tariffs will remain as high as announced (Chinese imports face a 54% levy) or for how long, as Trump has suggested he is open to negotiating rates lower while his authority for imposing them could also face legal challenges.

But for now, they could provide political cover for lawmakers to push through tax cuts on Capitol Hill.

“So long as tariffs remain in place, the administration can also point to the around $700bln in annualized revenue they would raise assuming unchanged trade deficits,” Citi said. “Treasury Secretary Bessent suggested yesterday that that could be used to offset new individual tax cuts. That might be an argument used to win over fiscal conservatives and is also consistent with prior administration statements that the tariff revenue will be redistributed to the American people.”

Tax cuts could help ease the impact that tariffs will have on the economy, which is increasingly seen slipping into recession.

On Friday, JPMorgan analysts said they expect GDP to shrink by 0.3% this year, reversing a prior view for an expansion of 1.3%. The unemployment rate is also seen climbing to 5.3% from the current level of 4.2%.

A separate analysis from the Tax Foundation also estimated the costs and benefits of Trump’s tariffs.

It found that when the new duties are added to the already-announced ones, the tariffs will reduce GDP by 0.7% and raise nearly $2.9 trillion in revenue over the next decade. Foreign retaliation will shrink GDP by another 0.1%.

The tariffs will also reduce after-tax income by an average of 1.9% and equate to an average tax increase of more than $1,900 per US household in 2025, according to the Tax Foundation.

Meanwhile, estimates vary on the effective tariff rate. The Tax Foundation put it at 16.5% and said tariffs will increase federal tax revenues by $258.4 billion in 2025, or 0.85% of GDP, representing the largest tax hike since 1982.

But Fitch Ratings estimated that the overall effective tariff rate will be about 25%—the highest since 1909—up from its prior estimate of an 18% rate and more than 10 times last year’s rate of 2.3%. Citi said it’s above 25%.

In a note on Thursday, JPMorgan chief economist Bruce Kasman called the tariffs the biggest tax increase since the Revenue Act of 1968, which preceded the 1969-70 recession, and sounded doubtful that they could be sufficiently offset by income tax cuts.

“The effect of this tax hike is likely to be magnified—through retaliation, a slide in US business sentiment, and supply chain disruptions,” he wrote. “The shock is likely to be only modestly dampened by the flexibility tariff hikes afford for further fiscal policy easing.”

This story was originally featured on Fortune.com



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Apple airlifted 600 tons of iPhones to the U.S. to try to beat Trump’s tariffs as customers scramble to secure devices before possible price increases

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Martin Luther King Jr.’s daughter says housing discrimination is rearing its ugly head again: ‘We may end up right back where we were in the ’50s’

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Bernice King warns decades of work to reduce inequities in housing is at risk, as the Trump administration cuts funding for projects and tries to reduce funding for nonprofits that handle housing discrimination complaints.

“I shudder to think what’s going to happen — there’s still a lot of residential segregation,” King, CEO of The King Center and the youngest daughter of civil rights leaders The Rev. Martin Luther King Jr. and Coretta Scott King, told The Associated Press. “It’s better than it was during my father’s lifetime. But going forward, we may end up right back where we were in the ‘50s and in the ’60s. People will feel very emboldened to discriminate because they know there’s nothing there to to stop it.”

In February, the U.S. Department of Housing and Urban Development canceled millions of dollars in grants to nonprofits that handle housing discrimination complaints. A judge temporarily froze the terminations, which HUD said targeted funding awards that included diversity, equity and inclusion, or DEI, language.

The department will uphold the Fair Housing Act and combat discrimination in housing, a HUD official said, adding that no staffing changes specific to the department have been announced.

King said the attacks on what the administration calls DEI look familiar.

“To me, these are those same old historic, divide-and-conquer tactics to try to keep people fighting with each other and keep people separated and keep a certain hierarchy existing in a society,” she said.

Continuing to press to end discrimination in housing

Whenever she can, King said she highlights her father’s legacy pressing for economic equality, including speaking Thursday at the Northwest African American Museum in Seattle, near where Habitat for Humanity of Seattle-King & Kittitas Counties is building a new condominium named after him.

The 58-unit apartment block is located on Martin Luther King Jr. Way in King County, which is also named for him. Construction on the site has started and units will eventually be sold to buyers at affordable prices.

Seattle Habitat CEO Brett D’Antonio, said naming the building after King offered a chance to talk about racial equity in housing, part of Habitat for Humanity’s efforts to raise awareness about fair housing, including its fundraising campaign Home is the Key, in April in remembrance of the Fair Housing Act’s passage.

“There was just no better opportunity to name the building in honor of Dr. King as we look to the work ahead of us in tackling affordable housing needs across the country, but also here in Seattle,” he said.

Bernice King remembers when her father moved their family in 1966 to a third-floor walk-up without heat in Chicago. Martin Luther King Jr. came to Chicago to try to break through discrimination housing, which left Black residents paying more in rent for worse conditions than white tenants.

Martin Luther King Jr. campaigned in Chicago, speaking to crowds of tens of thousands around the area and leading a march to City Hall to tape their demands on the front door. A week after he was assassinated in 1968, the Fair Housing Act was signed into law, which prohibited discrimination in housing based on race and other characteristics and created mechanisms to resolve complaints.

She said the dream of fair and equitable housing that the law’s passage signaled has still not be realized.

“To allow its provisions to be weakened is to betray the commitment and the sacrifices made to realize it,” she said, speaking in Seattle.

Housing inequity continues today

Large discrepancies in homeownership between Black, Hispanic and white Americans persist today, though that is just one measure of inequity in housing access. The National Fair Housing Alliance found housing discrimination complaints reached a record 34,000 in 2023, with most involving rentals and over half having to do with discrimination based on disability.

Diane Levy, who researches housing at the Urban Institute, said she was concerned about who will take future fair housing complaints if funding to nonprofits that handle those complaints is significantly diminished.

“If you experience discrimination, if it’s blatant, that takes a toll,” she said, adding even unseen discrimination limits where you can live and whether to rent or buy home, which, in turn, limits where you can work or go to school.

Levy also noted the administration ended federal protections against housing discrimination based on sexual orientation and gender identity.

Bernice King said this moment calls for creativity and perseverance.

“People feel like it’s okay to discriminate — okay to suppress, oppress and deny,” she said. “It just means those of us who are on the side of standing up for what is right and fighting for freedom, justice and equality, having even more work to do.”

This story was originally featured on Fortune.com



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Gen Z workers are freaking out about a potential recession and it’s decimating their confidence

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The youngest generation of workers is feeling down. 

Mass federal workforce layoffs, stagnant wages and a deceptively complicated job market have all conspired to set Gen Z on edge, and they’re feeling the full weight of a fearful economic environment. 

Less than half of workers overall feel optimistic about the future, according to Glassdoor’s Employee Confidence Index published earlier this month. But that number reached a record low for entry-level employees in particular—only 43.4% of that cohort is positive about the 6-month business outlook for their employer, the lowest number since Glassdoor began collecting data in 2016. 

“Entry level workers have less job security. And so as they see these economic headwinds on the horizon, there’s an understandable concern that they might be the first ones to lose their jobs in a recession, or they’ll be left out in the cold when trying to find a new job,” Daniel Zhao, Glassdoor’s lead economist, tells Fortune

The latest numbers from Glassdoor mirror other surveys that show the confidence of American workers has taken a major hit. Recent data from LinkedIn showed that U.S. workers feel even worse about the future than they did during the height of the pandemic in April 2020; two major drivers of worker anxiety are a slowing jobs market and the impact of AI. 

The latest stock market volatility this week certainly won’t help workers gain back their confidence. After President Trump’s so-called “reciprocal tariffs” took effect, global markets plunged Wednesday, sending business leaders into panic mode. Although Trump announced a 90-day pause on those tariffs later in the day, with the major exception of China that got hit with an even steeper levies, economists warn that major damage has been done. Markets seemed to reflect that on Thursday, as stock prices dropped once more amid trade worries.    

“Many employers are pulling back on budgets, promoting less, hiring less, and that all adds up to less opportunities for entry level workers to climb the career ladder,” says Zhao. 

But he argues that it’s imperative for young workers especially to tune out chaos as best they can, and focus on what they actually have power over. That includes things like careful budgeting, and working on adding to and improving their skill sets in a quickly-changing hiring environment. 

“There’s a lot of noise in the headlines right now and a lot of economic uncertainty flying around,” he says. “But ultimately none of us have control over that.” 

This story was originally featured on Fortune.com



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