Social Europe

  • EU Forward Project
  • YouTube
  • Podcast
  • Books
  • Newsletter
  • Membership

How Trump’s Tariff Regime Fuels Global Oligarchy

Gabriel Zucman 20th June 2025

Trump’s radical tax vision could dismantle the IRS, reshape global inequality—and fuel a new economic war.

u42198346

You have to give Donald Trump credit for one thing: for all his inconsistency on many issues, he believes deeply in high tariffs. He has been preaching that gospel for at least four decades – convinced that tariffs are the key to America’s future prosperity. 

Shortly after promising to “tariff and tax foreign countries to enrich our citizens” during his second inaugural address, Trump declared a “national emergency” to justify a flurry of executive orders to that effect. The culmination of this policy came on April 2 (“Liberation Day”), when he announced a 10% baseline tax on all imports, as well as higher levies for dozens of countries that run merchandise trade surpluses with the United States. In the case of China, which retaliated in kind, Trump hiked US tariffs to a staggering 145%. 

Following an ominous spike in Treasury yields, Trump announced a 90-day pause. While some top figures in his administration described this reversal as a way to test other countries’ willingness to negotiate, Trump himself claimed that the tariffs would generate trillions of dollars in revenues if made permanent. “There is a chance that the money from tariffs could be so great that it would replace” the income tax, he told Fox News.

Trump is apparently driven by a quixotic view of American economic history. As he tells it, the US has never been as prosperous as it was under President William McKinley (1897-1901), when imports were subject to heavy tariffs, and the federal government – prior to the introduction of income tax – was a fraction of its current size. Yet in 1913, “for reasons unknown to mankind,” he complains, “they established the income tax so that citizens, rather than foreign countries, would start paying the money necessary to run our government.” In Trump’s view, this change contributed to economic instability, including the Great Depression, which supposedly could have been avoided if McKinley’s tariff policy had continued. 

Thus, underpinning Trump’s economic policy is a deep-seated conviction that the establishment of progressive income taxation was a mistake. He is openly advocating the elimination of the one federal tax that the wealthy are supposed to pay annually. In expressing this radical ambition, he echoes Milton Friedman, who also argued that the federal income tax – with a top marginal rate that averaged 78% between 1930 and 1980 – was a major drag on US growth. 



Don't miss out on cutting-edge thinking.


Join tens of thousands of informed readers and stay ahead with our insightful content. It's free.



While Trump is unlikely to succeed in abolishing the income tax within the next four years, the administration’s actions are already reshaping federal tax policy, including by gutting the Internal Revenue Service. As of May, some 20,000 employees had accepted voluntary separation offers under a program designed to shrink the agency’s workforce, which is expected to decline by nearly one-third this year – and some reports suggest that there could be deeper cuts, reducing the IRS workforce by half. 

The consequences of these cuts will be profound. Wealthy individuals – whose income often flows through complex business structures – will be far more likely to underreport earnings when oversight is limited. But working- and middle-class Americans – whose wages are typically reported directly by employers – will have no such option. A weakened IRS disproportionately benefits the wealthiest by making tax evasion great again. 

How, then, does the administration intend to respond to the rising deficit that will result from this loss of revenue? With further budget cuts, of course. Social programs for the most disadvantaged, such as Medicaid and Medicare, will be the first on the chopping block. And over time, such policies will exacerbate economic inequalities and drive further concentration of wealth. 

In fact, we are already witnessing a dramatic rise of the share of wealth owned by the super-wealthy. According to my calculations, based on data from Forbesand the US Federal Reserve, it took four decades (1982-2023) for the share of wealth owned by the top 0.00001% (19 households today) to grow from 0.1% to 1.2%. But in just one year, 2024, this share jumped to 1.8% – representing about $2.6 trillion. That is the biggest one-year increase on record, and Trump wasn’t even in office. 

The international implications of these US tax and trade policies are no less profound. After decades of financial integration, decisions made in Washington inevitably reverberate globally. Nearly 50% of shares in US-listed companies are now held by foreign investors – a dramatic increase from just 5% in the 1980s. When US corporate taxes are cut, as congressional Republicans hope to do again this year, the gains – whether from higher dividends or higher stock valuations – go not only to American shareholders, but also to the wealthiest individuals worldwide. 

That means the debate over tariffs and income taxes is no longer a purely domestic issue. As US income taxation comes under threat, and as the effects of US policies are exported abroad, the concentration of wealth could accelerate globally. 

But it is not too late to act. The best response that other countries can mount is not to escalate a tariff war, which would benefit no one. Rather, it is to target US multinationals and their owners directly. The world needs tariffs not for US exports, but for oligarchs. 

To that end, other countries should make market access to foreign multinationals (and their main owners) conditional on their paying a minimum amount of tax. Any country can do this on its own; but the larger the coalition, the greater the chance of establishing a new global standard. If billionaires refuse to pay taxes, market access for the firms they own should be denied. 

Trump’s desire to turn the clock back to the late nineteenth century spells doom for the US and would accelerate the trend toward fragmentation, yawning inequality, and the erosion of public trust worldwide. Twenty-first-century challenges demand forward-looking solutions that align economic integration with fiscal fairness. The current chaos offers a critical opportunity to develop alternatives.

Copyright Project Syndicate

Gabriel Zucman
Gabriel Zucman

Gabriel Zucman, professor of economics at the Paris School of Economics and the University of California, Berkeley, is founding director of the European Union Tax Observatory and a 2023 recipient of the American Economic Association’s John Bates Clark Medal.

Harvard University Press Advertisement

Social Europe Ad - Promoting European social policies

We need your help.

Support Social Europe for less than €5 per month and help keep our content freely accessible to everyone. Your support empowers independent publishing and drives the conversations that matter. Thank you very much!

Social Europe Membership

Click here to become a member

Most Recent Articles

u4219834dafae1dc3 2 EU’s New Fiscal Rules: Balancing Budgets with Green and Digital AmbitionsPhilipp Heimberger
u42198346d1f0048 1 The Dangerous Metaphor of Unemployment “Scarring”Tom Boland and Ray Griffin
u4219834675 4ff1 998a 404323c89144 1 Why Progressive Governments Keep Failing — And How to Finally Win Back VotersMariana Mazzucato
u42198346ec 111f 473a 80ad b5d0688fffe9 1 A Transatlantic Reckoning: Why Europe Needs a New Pact Beyond Defence SpendingChristophe Sente
u4219834671f 3 Trade Unions Resist EU Bid to Weaken Corporate Sustainability LawsSocial Europe

Most Popular Articles

u4219834647f 0894ae7ca865 3 Europe’s Businesses Face a Quiet Takeover as US Investors CapitaliseTej Gonza and Timothée Duverger
u4219834674930082ba55 0 Portugal’s Political Earthquake: Centrist Grip Crumbles, Right AscendsEmanuel Ferreira
u421983467e58be8 81f2 4326 80f2 d452cfe9031e 1 “The Universities Are the Enemy”: Why Europe Must Act NowBartosz Rydliński
u42198346761805ea24 2 Trump’s ‘Golden Era’ Fades as European Allies Face Harsh New RealityFerenc Németh and Peter Kreko
startupsgovernment e1744799195663 Governments Are Not StartupsMariana Mazzucato
u421986cbef 2549 4e0c b6c4 b5bb01362b52 0 American SuicideJoschka Fischer
u42198346769d6584 1580 41fe 8c7d 3b9398aa5ec5 1 Why Trump Keeps Winning: The Truth No One AdmitsBo Rothstein
u421983467 a350a084 b098 4970 9834 739dc11b73a5 1 America Is About to Become the Next BrexitJ Bradford DeLong
u4219834676ba1b3a2 b4e1 4c79 960b 6770c60533fa 1 The End of the ‘West’ and Europe’s FutureGuillaume Duval
u421983462e c2ec 4dd2 90a4 b9cfb6856465 1 The Transatlantic Alliance Is Dying—What Comes Next for Europe?Frank Hoffer

Foundation for European Progressive Studies Advertisement

Spring Issues

The Summer issue of The Progressive Post is out!


It is time to take action and to forge a path towards a Socialist renewal.


European Socialists struggle to balance their responsibilities with the need to take bold positions and actions in the face of many major crises, while far-right political parties are increasingly gaining ground. Against this background, we offer European progressive forces food for thought on projecting themselves into the future.


Among this issue’s highlights, we discuss the transformative power of European Social Democracy, examine the far right’s efforts to redesign education systems to serve its own political agenda and highlight the growing threat of anti-gender movements to LGBTIQ+ rights – among other pressing topics.

READ THE MAGAZINE

Hans Böckler Stiftung Advertisement

WSI Report

WSI Minimum Wage Report 2025

The trend towards significant nominal minimum wage increases is continuing this year. In view of falling inflation rates, this translates into a sizeable increase in purchasing power for minimum wage earners in most European countries. The background to this is the implementation of the European Minimum Wage Directive, which has led to a reorientation of minimum wage policy in many countries and is thus boosting the dynamics of minimum wages. Most EU countries are now following the reference values for adequate minimum wages enshrined in the directive, which are 60% of the median wage or 50 % of the average wage. However, for Germany, a structural increase is still necessary to make progress towards an adequate minimum wage.

DOWNLOAD HERE

S&D Group in the European Parliament advertisement

Cohesion Policy

S&D Position Paper on Cohesion Policy post-2027: a resilient future for European territorial equity

Cohesion Policy aims to promote harmonious development and reduce economic, social and territorial disparities between the regions of the Union, and the backwardness of the least favoured regions with a particular focus on rural areas, areas affected by industrial transition and regions suffering from severe and permanent natural or demographic handicaps, such as outermost regions, regions with very low population density, islands, cross-border and mountain regions.

READ THE FULL POSITION PAPER HERE

ETUI advertisement

HESA Magazine Cover

With a comprehensive set of relevant indicators, presented in 85 graphs and tables, the 2025 Benchmarking Working Europe report examines how EU policies can reconcile economic, social and environmental goals to ensure long-term competitiveness. Considered a key reference, this publication is an invaluable resource for supporting European social dialogue.

DOWNLOAD HERE

Eurofound advertisement

Ageing workforce
The evolution of working conditions in Europe

This episode of Eurofound Talks examines the evolving landscape of European working conditions, situated at the nexus of profound technological transformation.

Mary McCaughey speaks with Barbara Gerstenberger, Eurofound's Head of Unit for Working Life, who leverages insights from the 35-year history of the European Working Conditions Survey (EWCS).

Listen to the episode for free. Also make sure to subscribe to Eurofound Talks so you don’t miss an episode!

LISTEN NOW

Social Europe

Our Mission

Team

Article Submission

Advertisements

Membership

Social Europe Archives

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Miscellaneous

RSS Feed

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

BlueskyXWhatsApp