[Highly recommended to read] Is the United States currently raising taxes madly on the whole world really beneficial for itself?

In this world, the relationship between what is said and what is done is not necessarily true. If you directly believe what is said on the surface, you are likely to be deceived. Just like some things, the East University "can do but cannot say" is the same for the West University.
Just like the new tariffs in the United States are actually an "import quota system", yet they insist on calling it "reciprocal tariffs". In fact, the U.S. government's financial crisis is about raising money, yet they insist on naming it "manufacturing return".
Returning to a substantive issue, the essence of the tariff war initiated by the United States actually consists of two parts: tariff quotas for countries with trade deficits and a universal 10% tariff system. Here, the targets are actually two different subjects, one of which can be mentioned and the other cannot. The former target is undoubtedly China. As for the latter? The unmentionable targets are multinational giants, such as Apple and Nike.
Let's go back to a simple question: why is the U.S. government facing a fiscal crisis? How can it be out of money? Because the U.S. government is not collecting taxes. Why is the government, or rather the so-called "world's strongest gang IRS" often mentioned by many, not collecting taxes? Because America's tax laws are extraordinarily friendly to smart people. There's an exaggerated saying that the U.S. tax code has 12 million pages, but in reality, the part that actually deals with tax collection is summed up in just 10 pages, while the rest discusses how to evade taxes or legally pay less or delay taxes. Can you guess who the smartest people are? Of course, it's the wealthy and multinational corporations. Even if they aren't smart themselves, they can hire smart people to help them with this.
The next question is, how do multinational companies avoid taxes? If we want a rigorous definition, there are not many things in U.S. tax law that truly allow for complete tax avoidance, but it generally allows you to defer tax payments. So how long can this tax be deferred? Theoretically, some can be deferred indefinitely: )
Before discussing this issue, let's first take a look at how Dongda operates in export trade. The core of Dongda's exports is the tax rebate system. The core purpose of the tax rebate is not solely to reduce costs; it is also to encourage enterprises to repatriate their funds back to Dongda. If you do not bring the money back for foreign exchange settlement, you will not receive the tax rebate. However, if your money comes back, then tax collection becomes easier because the accounts will be reconciled.
The process above does not exist in the United States. As a manifestation of modern capitalism, America's biggest problem is that most imported products have no tariffs or very low tariffs. The issue this creates is not that the U.S. does not collect tariffs, but rather that zero tariffs allow multinational giants like Apple and Nike to perform accounting magic at low costs around the world, ultimately leading to the U.S. not receiving corporate income tax.
Let's take Apple as an example, an iPhone costs between $300-$350 to produce in China, and $1,000 in the United States. So how much does Apple use to file customs in the United States? Not necessarily, it depends on the cost of marketing it in the United States. The nominal process might be to export the iPhone to the Irish branch for $350, and then the Irish branch to the U.S. for $750. Because there are no tariffs in the United States, the gross profit is $250 after selling $1,000, and after amortizing the wages of Silicon Valley coders and the cost of sales ( which is exactly $250 ) Apple's profit in the United States is exactly 0. The real profit of $400 from this iPhone remained in the Irish branch because of Ireland's low corporate income tax. Although this phone never appeared in Ireland from start to finish. And this profit does not have to be taxed in the United States until it is remitted back to the United States, and in fact the money may never be transferred back to the United States. And this money can also be invested in the US stock market and Treasury bonds in the form of foreign capital, and the income is tax-free: )
Of course, in practice, the play of multinational companies is much more complicated, and cross-border taxation is the core department of any American multinational company, and many of them have PhDs in economics. But the essential logic is the same: with the help of the tariff-free or low-tariff characteristics of the United States, increase the value of customs declarations, reduce profits in the United States from the books, and keep profits in overseas low-tariff areas. The corporate income tax in the United States was very high before, almost 35%, and now it is 21%, and in the previous iPhone example, if the profit is $400, it is $80 income tax, and it was $140 before.
There is something that is definitely not a joke: the U.S. indeed hides wealth among the "people," but the question is how to define who these people are. More than ten years ago, when I first arrived in the U.S., there was a saying that if the IRS could collect all the deferred tax payments from businesses and individuals (, they could pay off the U.S. national debt in one go without much of a problem. Of course, the national debt wasn't as high back then, but conversely, the stock market wasn't as high as it is now either. It's important to know that theoretically, 25% of the stock market's gains belong to the IRS. Has the IRS received that much money?
So what is the relationship between multinational companies avoiding taxes and universal tariffs? Because if there is a 10% universal tariff, if Apple continues to declare a value of $750 in the United States, it will have to pay $75 in tariffs. Some say that Apple can lower the declared value since the actual cost is only $350. You are correct, but in this case, although Apple only has to pay $35 in taxes, its reported cost in the United States is lower, and the final profit from sales is $400 - $35 = $365, and this amount will be subject to corporate income tax.
One of the major tasks of each U.S. president has been to find ways to make multinational corporations pay taxes. During his first term, Trump lowered corporate taxes and provided repatriation exemptions, while Biden is working on a global minimum tax alliance. However, it seems that multinational corporations are quite resistant, but if a general tariff system is implemented, it could play a certain role in undermining their position.
Therefore, a general tariff of 10% is likely to greatly reduce the current tax avoidance effectiveness of multinational corporations. However, this cannot be publicly stated. Because offending all multinational corporations is a bigger problem than offending China. Inciting MAGA sentiment against China has controllable consequences, but inciting public opinion against all multinational giants, even if the king of understanding goes crazy, he wouldn't dare to do it. However, the U.S. government is indeed out of money and must plug this loophole; it just means that what is said and what is done must be separated. Therefore, the general basic tariff can only be aimed at "foreign" entities, and it even needs to indiscriminately cover uninhabited islands. Otherwise, tomorrow a company may appear on that island.
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