B2 – Upper Intermediate
President Donald Trump’s renewed “America First” agenda in 2025 is disrupting decades of globalization by targeting international tax and regulatory strategies. Proposals include imposing a 25% tariff on Apple if it doesn’t manufacture iPhones domestically and a 50% levy on imported steel and aluminum. These measures aim to dismantle complex international systems of tax, regulatory, and financial arbitrage that U.S. multinationals have long utilized to reduce domestic tax liabilities. For instance, pharmaceutical companies often report minimal profits in the U.S. while declaring substantial gains abroad, and insurers shift liabilities to jurisdictions like Bermuda for lighter regulations.
Read the article to know more about the proposed provision to tax foreign investors in U.S. assets could further affect global capital flows, potentially destabilizing international finance. While these policies seek to reinforce domestic equity, they risk undermining the foundational pillars of the global economic and financial system.
https://www.reuters.com/breakingviews/why-america-first-could-end-age-arbitrage-2025-06-06/?
Vocabulary Questions:
- What does “ceding reserve” mean? ” The industrial-scale transfer of life insurance policies by U.S. insurers to offshore jurisdictions – a process known as “ceding reserves” – provides a timely example.” Use it in a sentence.
- What does “golden goose” mean? “They can also short tax havens and lightly regulated jurisdictions in the anticipation that the golden geese will be flying home.” Use it in a sentence.
- What does “shadow bank” mean? “This is the edifice of international finance underpinned by the U.S. dollar. In a recent lecture, Hyun Song Shin of the Bank for International Settlements explained how, before 2008, liquidity in international markets was supplied by so-called shadow banks issuing private credit instruments.” Use it in a sentence.
Discussion Questions:
- Do you think prioritizing domestic production through tariffs is beneficial for a country’s economy in the long run or does it do more harm than good?
- How do you feel about taxing foreign investors in U.S. assets? Could that strengthen or weaken the U.S. economy?
- If you were running a global company, how would you respond to policies that limit tax and regulatory advantages abroad?
- Do you think the rest of the world will follow suit with their own “first” policies, or will they push back against this kind of economic nationalism?
- Is it fair for multinational corporations to shift profits and liabilities to lower-tax countries, or should they be taxed more strictly where they operate?