The economic proposals by presidential candidates Kamala Harris and Donald Trump stand to significantly impact businesses. But some point to Trump's interest in new tariffs as the approach that could have the most adverse effects.
Former president Trump, the Republican nominee, has stated that he plans to impose a 10% tariff across the board for goods coming into the U.S. and a significant 60% tariff on imported goods from China. Trump implemented tariffs on Chinese imports, including solar panels, steel and aluminum, during his first administration, which President Joe Biden kept in place.
Sanjay Patnaik, a senior fellow at the Brookings Institution, said that while tariffs make sense for goods important to national security, Trump's plans for new, increased tariffs don't make sense for more basic items. He said it will result in higher costs for businesses and consumers.
"Those would impact businesses and consumers negatively," Patnaik said of new tariffs. "This would be a huge stamp in economic growth and significant rising costs for businesses."
Tariffs generally hurt companies dependent on foreign inputs, such as machinery, steel and computer chips, according to Rob Atkinson, founder and president of Washington D.C. think tank Information Technology and Innovation Foundation. Taxing capital goods will result in less investment, he said.
"It'll raise those input costs, which, on margin, will have a net negative impact," he said.
Atkinson said countries could also impose their own tariffs in retaliation, which would nullify the effects of new U.S. tariffs.
"Trump's argument is, 'We're so big we can do this,' and there's some truth to that," he said. "But there will be retaliation, and it will limit the protectability of the tariffs."
Patnaik said predictability is a crucial and often overlooked aspect for both small and large businesses -- something he doesn't believe a Trump administration guarantees based on previous policy actions and current plans like the new tariffs.
"If I'm a CEO, I'm not going to make any investments if I don't know how the regulatory regimen is going to look or whether there's going to be a huge economic upheaval because we're going to have 60% tariffs on products from China," he said. "The uncertainty is really something that is the most poisonous for businesses."
Trump focuses on new tariffs, Harris turns to taxes
As Trump talks up new tariffs, Vice President Harris is looking to tax changes to boost domestic production and investment. Harris, the Democratic nominee, plans to raise the corporate tax rate from 21% to 28% and stated in her economic proposal that she wants to stop companies from shifting jobs overseas.
Atkinson said that likely means companies' ability to defer foreign-sourced income from, say, Malaysia or Indonesia. Companies will have to repatriate the funds so that they can be taxed at the proposed 28% U.S. tax rate.
"At one level, that does reduce the tax incentive for companies to move production to Malaysia because now it doesn't matter what the Malaysian tax is because you're still paying 28%," he said. The issue remains complex, however, because other countries might out-compete U.S. companies facing the higher tax rate, he said.
Additionally, Patnaik said he expects such a significant increase to the corporate tax rate would cause businesses to reduce funds for investments and affect their cash on hand. The tax deductions, as part of the corporate tax rate increase, would also dictate whether larger or smaller companies would be more affected, he added.
"A lot of times, we see big companies trying to find ways around high corporate tax rates that are oftentimes not available to smaller companies," Patnaik said.
Harris also outlined plans to increase tax deductions for startups from $5,000 to $50,000 -- a move Patnaik applauded. He said implementing such a large deduction would help boost entrepreneurship and business creation in the U.S.
Atkinson, on the other hand, argued that increasing the startup deduction could harm the economy. Businesses that would significantly benefit from a tax deduction of $50,000 often have little to no effect on jobs and economic growth at scale compared with venture capital-backed startups that plan to grow into large multimillion dollar businesses.
"I think it would have very little effect on growth businesses," he said.
Meanwhile, Trump will seek to make provisions within the Tax Cuts and Jobs Act permanent. Trump signed the TCJA in 2017, which lowered marginal tax rates and reduced the corporate tax rate from 35% to 21%. Atkinson said lowering the corporate tax rate might create more competition and enable greater investment.
However, Patnaik said Trump would need Congress to cement those provisions that are set to expire in 2026. That will likely include compromises, which makes it difficult to predict how a final version might look.
"That final composition will determine what the impact on businesses will be -- whether it's going to be mostly benefitting bigger companies, whether it's going to be benefitting smaller ones, whether it's going to increase taxes or not on corporations," Patnaik said. "This is very hard to predict."
Ultimately, Patnaik said that neither economic proposal from Trump nor Harris is focused enough on reducing the federal deficit.
"They're promising all kinds of tax cuts or subsidies that are extremely expensive, and neither candidate has really presented a serious approach to how we can rein in the federal deficit," he said.
Regulation, energy differences prominent in plans
Trump outlined his goal to "cut costly and burdensome regulations," which will include lifting restrictions on U.S. energy production of oil, natural gas, coal and nuclear power. That would most likely also include efforts to slow-walk incentives from the Inflation Reduction Act (IRA) to develop and deploy clean energy technology, Patnaik said.
The uncertainty is really something that is the most poisonous for businesses.
Sanjay PatnaikSenior fellow, Brookings Institution
"I think a lot of regulations related to climate, climate policy, energy efficiency -- there will be a lot of rollbacks for that," he said. "That already happened in his first term."
Atkinson said Trump might target the National Environmental Policy Act, which requires federal agencies to assess whether their actions will have a substantial effect on the environment. He said he also expects businesses will slow any clean energy investments under a Trump administration, particularly if it targets the IRA.
Meanwhile, Harris will seek to realize more of the goals established within the IRA by "cutting red tape," such as permitting reform to allow infrastructure projects to move ahead in a timely manner.
Patnaik said it can take years to secure necessary permits, such as right-of-way permits, for a project. He said he supports Harris's push for modernization as part of her economic platform.
"Passing the IRA without significant permitting reform really puts a lot of hurdles on all the infrastructure that has to be built out," he said. "We're not going to fulfill the promise of the IRA without significant permitting reform."
As for other regulations, Trump stated on his platform that he plans to repeal Biden's executive order on artificial intelligence, which Patnaik said indicates he likely wouldn't advocate for AI regulation. Atkinson said he expects Harris, on the other hand, will continue to push for stringent data privacy, AI and facial recognition regulations.
Makenzie Holland is a senior news writer covering big tech and federal regulation. Prior to joining TechTarget Editorial, she was a general assignment reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.
