Trump Proposes Income Tax Cut to Ease Tariff Pain; U.S. in Talks With China Over Trade

W. Syaban

April 28, 2025

The U.S. president proposed reducing the income tax—or perhaps eliminating it entirely—for individuals earning under $200,000 annually.

US President Donald Trump proposed on Sunday that his extensive tariff measures would enable him to decrease income taxes for individuals earning under $200,000 annually, amid growing public concern about his economic plans.

Trump had earlier contended that tariffs could generate enough revenue to substitute for income taxes; however, experts in economics have cast doubt on such assertions.

"When Tariffs cut in, many people's Income Taxes will be substantially reduced, maybe even completely eliminated. Focus will be on people making less than $200,000 a year," Trump wrote on Sunday on his Truth Social network.

Are you looking for insights into the most significant issues and developments globally? Find your answers here. SCMP Knowledge Our latest platform features handpicked content including explainers, FAQs, analyses, and infographics, all provided by our acclaimed team.

Within just a few weeks, Trump's tariffs have disrupted the worldwide economic landscape, sparked concerns about increased costs for American consumers, and prompted predictions that these strategies could result in an economic downturn.

According to a CBS News survey published on Sunday, 69 percent of Americans feel that the Trump administration did not prioritize reducing prices sufficiently. The approval rating for Trump’s management of the economy dropped to 42 percent from 51 percent in early March, as indicated by the same poll.

Trump wants to extend reductions in income taxes that were approved in 2017 during his first presidency, many of which are due to expire at the end of 2025. He also has proposed expanding tax breaks - including by exempting workers' tips and social security earnings - while slashing the corporate tax rate to 15 per cent from 21 per cent.

Treasury Secretary Scott Bessent addressed public opinion polls over the weekend, stating that American consumers continue to spend money. He also mentioned that the administration is focusing on developing individual trade agreements following President Trump’s imposition of what were termed as reciprocal tariffs across numerous nations at the beginning of April. Following this measure, he announced a temporary suspension of these duties for 90 days, applicable to every nation impacted with the exception of China.

This initiative includes 17 major trading partners, excluding China , Bessent mentioned on ABC's This Week .

He stated, 'We have an established procedure over the coming 90 days to engage in negotiations with them.' He added that some of these discussions are progressing quite smoothly, particularly with nations from Asia.'

Bessent restated the government's position that Beijing will eventually have to engage in negotiations since China won't be able to withstand the current U.S. tariff rate of 145 percent on Chinese products imposed by Trump.

Bessent stated that their business strategy relies on offering inexpensive, subsidized products to the U.S. If this supply were to abruptly cease, it would lead to an immediate halt in their economic activities; thus, they will engage in negotiations.

Trump has said the US is talking to China on trade, which Beijing has denied. Bessent said he did not know if Trump and President Xi Jinping had spoken.

He mentioned that he encountered his Chinese counterparts when international financial authorities met in Washington the previous week; however, their discussions were primarily focused on conventional topics such as maintaining financial stability and detecting early warning signs for the global economy.

Bessent expressed his belief that there is a way forward for discussions with China, starting with "a reduction in tensions," leading to an "initial agreement."

"Securing a trade deal may require several months; however, reaching a preliminary accord along with adherence to proper conduct and maintaining compliance with the established terms by our trading allies can prevent tariff levels from escalating to their peak," he stated.

In Congress, the outline of a Republican-backed bill from early April could facilitate up to $5.3 trillion in tax reductions over ten years. Trade advisor Peter Navarro has stated that President Trump’s tariffs might produce even greater revenues. However, most economic experts predict these tariffs will yield substantially lower amounts.