Update 860 – Trump Winging it on Tariffs,
Moves to Dismantle Direct File, CFPB
Last weekend, the Trump administration exempted some electronic products from its reciprocal tariff regime, an exception likely to be brief. Trump and his advisors have hinted at an investigation to determine an eventual duty on these products. Separately, this week, the administration continued its attempt to dismantle federal programs and agencies designed to help everyday Americans. The administration announced plans to scrap Direct File, which allows taxpayers to file returns for free; moved to fire 1,500 of the CFPB’s 1,700 employees; and illegally dismissed the Democratic members of the National Credit Union Administration board.
Meanwhile, some GOP moderates have begun expressing concern about cutting Medicaid benefits in the tax reconciliation bill being negotiated by committees of jurisdiction. Trump is expected to send a rescission package to Congress when it returns from its current recess after next week.
Good weekends all…
Best,
Dana
Headline
Trump Exempts Electronics From Tariffs… For Now
Temporary “Exemption” for Electronics
Over the weekend, Customs and Border Patrol published guidance outlining the Trump Administration’s exemption of 20 product categories – such as various forms of electronics – from the reciprocal tariff rates announced on April 2. Tariffs have since escalated to 145 percent on Chinese imports. On Sunday, Commerce Secretary Howard Lutnick clarified further that these products would only benefit from a 90-day reprieve while there is a separate investigation into semiconductors that will also encompass these electronic products.
Source: Bloomberg
The products – which account for 23 percent of goods imported from China – include smartphones, laptops, and memory chips, giving temporary relief to tech giants like Apple and Nvidia. The Trump administration is adamant that the term “exemption” was not applicable to last Friday’s announcement:
“There was no Tariff ‘exception’ announced on Friday. These products are subject to the existing 20 percent ‘Fentanyl’ Tariffs, and they are just moving to a different Tariff ‘bucket.’ … We are taking a look at Semiconductors and the WHOLE ELECTRONICS SUPPLY CHAIN in the upcoming National Security Tariff Investigations.”
While his agencies will soon undertake these Section 232 semiconductor investigations – which would include electronic products – there is seemingly little progress in a deal that could de-escalate the ongoing trade war between Washington and Beijing.
WTO 2025 Global Trade Outlook
This week, the World Trade Organization (WTO) released its 2025 Global Trade Outlook. Unsurprisingly, its projections forecast a contraction of world merchandise trade by 0.2 percent over 2025 – a 3 percent decrease from October’s forecasts. The report warns of a further drop of 0.8 percent if Trump’s “Liberation Day” reciprocal tariffs were enacted. Global GDP growth forecasts also dropped from 2.8 percent to 2.2 percent.
These trade shocks will affect each region differently. Exports in North America are projected to fall 12.6 percent, while Chinese exports outside of North America are expected to spike by 4 to 9 percent as Chinese supply chains redirect their goods. The United States may be set to further diversify its import markets as it shifts away from China to include “Less Developed Countries,” or LDCs, as indicated in the graph below:
Source: WTO
China, on the other hand, would likely expand its trade links with North American – excluding the U.S. – and South American countries. This report was released ahead of the IMF and World Bank spring meetings held in Washington, D.C. next week, where global economic uncertainty will surely be a hot topic.
Other Developments
The Fix Is In: Administration to Scrap Direct File Program
The AP reported this week that the Trump administration plans to end Direct File – an extremely popular tool that lets taxpayers with relatively simple returns file for free, directly with the IRS. Direct File, which was created through directives and funding from the Inflation Reduction Act (IRA), was unveiled last year in a 12-state pilot program and expanded to 25 states this filing season. The hundreds of thousands of taxpayers who used the tool this year gave it rave reviews:
- 98 percent of users said they were “satisfied” or “very satisfied” with their filing experience (84 percent “very satisfied”).
- 89 percent of users rated their filing experience a 9 or a 10.
- 94 percent of users said they preferred Direct File to their usual filing method.
Though such high support scores – especially for an IRS program, or any government program for that matter – are unusual, they are not surprising given the program saves taxpayers an average of $160, hours of time, and reduces the number of eligible non-claimants for valuable tax incentives.
While opponents argue that taxpayers can already file for free through the Free File Alliance, which pairs commercial tax preparation services with eligible taxpayers, commercial participants have been found time and time again to be upcharging users using dishonest and confusing tactics. And these are the same commercial tax preparation companies that have spent millions lobbying against Direct File, which they believe will hurt their bottom line if expanded.
Lobbying wasn’t the only headwind facing Direct File this past filing season: the Trump administration fired Treasury staff working on outreach, limited the IRS’s ability to promote the program, and spread confusing, dishonest information about Direct File’s future. Elon Musk went as far as to suggest the program had been “deleted” in a February X post, causing an immediate 25 percent reduction in usage and making states hesitant about a program with an uncertain future. It seems that the administration attempted to break a program in the hope that they could cut it based on “cause,” a tactic we have seen them use across a wide range of government agencies and programs.
Despite all the factors working against its success, Direct File has proved that it is possible to build a system for taxpayers to file for free, directly with the IRS. For a president who ran on a platform of increasing government efficiency and lowering costs for everyday Americans, the slashing of Direct File – a program that does exactly this – is a huge betrayal by Trump and his administration. It further underscores their mission of dismantling the IRS and their underlying goal of creating a tax system that “works” for the ultra-wealthy at the expense of everyday Americans.
Administration Moves to Fire Majority of CFPB Staff
Yesterday, the Consumer Financial Protection Bureau (CFPB) reportedly issued reduction in force (RIF) notifications to over 1,500 of its 1,700 employees, placing them on administrative leave and notifying them that their employment will be terminated in 60 days. This represents the Trump administration’s latest illegal attempt to dismantle the federal consumer watchdog as challenges to its earlier attacks on the agency continue to move through the courts.
The attempted illegal mass firings came after employees were reportedly sent a memo stating that the bureau would drastically “refocus” its work on Wednesday. The memo outlined a plan to:
- Shift the bureau’s supervision away from non-bank financial institutions like payday lenders and payment apps, and towards depository institutions like traditional banks.
- Deprioritize the bureau’s work related to medical debt, student loans, remittances, and justice-involved individuals.
- Shift resources away from enforcement and supervision that could be done by states.
Together, these moves would leave the CFPB without the resources necessary to effectively supervise and examine financial institutions and protect consumers and honest businesses.
Trump’s Illegal Dismissal of Democratic NCUA Board Members
On Tuesday night, President Donald Trump attempted to illegally fire the two Democratic members of the National Credit Union Administration (NCUA) board – Todd Harper and Tanya Otsuka – in his administration’s continued assault on the independent agencies designed to protect everyday Americans. Otsuka rightfully called the move a decision “To put politics above consumers and the safety of our financial system.” Harper echoed these concerns and noted that the decision undermines public trust in our nation’s financial services regulatory system.
Congress designed the NCUA to be bipartisan and independent. With two of the board’s three members removed, the only remaining board member is Chair Kyle Hauptman, who was first nominated to serve on the board by President Trump in 2020, during his first term, then designated as Chair by Trump in January. With only one member, the board now lacks a quorum, leaving it unable to make new policy.
NCUA board members are confirmed by the Senate to serve six-year terms. Harper was first nominated to serve the remainder of a partial term on the NCUA board by President Trump in 2019. President Biden later designated Harper Chair of the NCUA Board in 2021, a role he served in until this January. Biden also renominated Harper for a full term, which the Senate confirmed him to serve in 2022. His term is set to expire in April 2027. Otsuka was nominated to the NCUA board by President Biden and sworn in early last year. Her term was set to end in August 2029.
20/20 Vision strongly condemns the Trump administration’s illegal attempted firings at the NCUA, along with previous attempts to similarly fire Democratic members of the Federal Trade Commission.
GOP Moderates Turn Up Heat on Medicaid Cuts
A group of 12 House GOP moderates sent a letter to Republican leadership this week reiterating their opposition to Medicaid cuts. The letter, which was led by Representatives Don Bacon (R-NE) and David Valadao (R-CA), states that the signers “cannot and will not support a final reconciliation bill that includes any reduction in Medicaid coverage for vulnerable populations.” While not a repudiation of Republican-proposed work requirements and other reforms that are being pushed under the guise of “waste, fraud, and abuse,” the letter is perhaps the most strongly worded opposition to cuts we have heard from moderates throughout this year’s reconciliation process. The additional signers are as follows:
- Jeff Van Drew (R-NJ)
- Rob Bresnahan Jr. (R-PA)
- Juan Ciscomani, (R-AZ)
- Jen Kiggans (R-VA)
- Young Kim (R-CA)
- Robert Wittman (R-VA)
- Nicole Malliotakis (R-NY)
- Nick LaLota (R-NY)
- Andrew Garbarino (R-NY)
- Jeff Hurd (R-CO)
These statements come a week after House Republicans advanced a blueprint for budget reconciliation, instructing the House Energy and Commerce Committee – which has jurisdiction over Medicaid – to propose $880 billion in cuts. Such significant cuts in E&C would surely necessitate slashing Medicaid, but the administration and Republican leadership have assured moderates facing tough reelection contests next year that cuts would hold beneficiaries harmless. Additionally, moderates have been told that the Senate would scale back cuts from the House-instructed levels, though this was called into question last week when Senate Majority Leader John Thune (R-SD) stated the Senate aims to stick with the House instructions for cuts to appease fiscal hawks.
While fears over cuts to Medicaid have not been enough to force moderates to oppose recent reconciliation blueprints that have passed the House, that may change as committees craft tangible proposals to meet their reconciliation instructions. We can expect moderates to be more vocal and demanding in the coming weeks, and GOP leadership will have a hard time navigating this red line while keeping the support of fiscal hawks and finding enough revenue to pay for their $4.5 trillion-plus tax plans. Losing the support of either coalition will stop a reconciliation bill dead in its tracks come May.
Trump to Propose Rescissions Upon Congress’s Return?
In his first rescission package, Trump is expected to call on Congress to approve $9.3 billion in cuts, focused on targeting previously approved spending that he has vocally criticized. That spending includes a $1.1 billion cut for public broadcasting, including outlets such as NPR and PBS, which Trump believes are too critical of him. The remaining $8.2 billion is mainly geared towards making the gutting of USAID official, with several programs on the chopping block that were previously targeted by DOGE as “waste,” such as a program funding electric buses in Rwanda.
Rescission packages – which are essentially the legal way of impounding funds previously appropriated by Congress under the Impoundment Control Act (ICA) – allow the executive to withhold funding for up to 45 days, or until both chambers of Congress accept or reject the cuts through a simple-majority vote (no filibuster in the Senate). Interestingly, the Trump administration has consistently argued that the ICA is unconstitutional, but this pathway affords Trump and Republicans the ability to cut without facing additional legal challenges.
This package is notable in that it’s the first true attempt to enshrine the cuts made by DOGE into law. It is also notable in that the cuts are remarkably small. Musk and DOGE have promised trillions of dollars in spending cuts, and even their pared-back promises look at hundreds of billions in cuts. Enshrining not even $10 billion into law falls far short of that goal. While Trump will likely push for other rescission packages, and the Hill GOP is currently debating other spending cuts as part of the reconciliation package, the small size of this package really speaks to what 20/20 Vision has asserted previously: that DOGE’s promise of cutting government spending in any meaningful way is turning out to be a failed promise. Instead, its actions focus on dismantling whole sections of the government with minimum fiscal benefit and maximum pain.