Coming off a Middle East tour marked by royal-grade splendor, President Donald Trump is intent on positioning his statesmanship as singularly transformative, regardless of whether the reality matches his rhetoric. To be sure, his message of “commerce, not chaos” yielded anywhere between $700 billion and $4 trillion in investment commitments for U.S. tech companies (concerns about possible spread of advanced AI chips to China notwithstanding). His meeting with Syrian leader Ahmed al-Sharaa set in motion a process of lifting sanctions on Syria, reaping bipartisan praise.
Domestically, inflation numbers are cooler than expected, tariff revenues are on the rise, the job market remains strong, and unauthorized border crossings are at a historic low (following a trend that began under the Biden administration). Despite an “excellent” phone call with Russia’s President Vladimir Putin, Trump is stepping back from the Ukraine ceasefire talks as his focus shifts toward Iran, leaving a bipartisan package of sanctions on buyers of Russian energy to languish in the Senate.
Rather than rely on Congress with its slim Republican majority, Trump has been using executive power to advance major policy changes, such as overriding trade deals (including those signed by his first administration), dismantling federal agencies, or imposing sweeping immigration restrictions. Few of his actions have been codified into law and many have been postponed, scaled down, subject to legal pushbacks, or moving far slower than he expected.
At their current level, Trump’s tariffs are unlikely to replace income taxes as the main source of government funding, which he said they would. Instead, his officials have acknowledged that tariff costs would be borne by U.S. consumers, to the tune of $2,300 per household per year. Setbacks to the president’s tax-and-spending bill are pushing it off course from what Republican leaders in Congress have pledged to deliver, threatening to expand the budget deficit further and precipitating a downgrade to America’s last AAA credit rating.
MAGA voices contend that the Trump agenda’s make-or-break phase is between now and September, as the federal budget package takes shape and precedent-making legal cases wind their way through courts. After that, tariff-related price increases could begin pushing congressional Republicans into a midterm campaign mode. Judging by the polls, the Trump administration’s trade deals with China and the UK are clearly resonating, driving an uptick in optimism about the economy and cutting into the president’s net disapproval score on inflation and tariffs. Perhaps even more so than tax cuts and legal precedents, Trump’s ability to “rebalance” the U.S.-China trade without upending Americans’ economic fortunes could help determine how much of his agenda he can actually deliver and how “transformative” that might be.
The Trump administration’s goal is not a “generalized decoupling from China” but rather a decoupling for “strategic necessities” like steel, critical medicines, and semiconductors, according to Treasury Secretary Scott Bessent who has been managing President Trump’s tariff policy. Following the May 10 talks in Geneva, the administration’s tariffs on most Chinese goods stand at 30%, far below the 145% “reciprocal” rate that went into effect April 9 but higher than the 12% average rate during the first Trump term.
Analysts predict that the levies will remain at 30% through late 2025, high enough to wipe out 70% of Chinese shipments to the U.S. in the medium run, but no longer constituting a de-facto trade embargo. They also expect the negotiations to continue beyond an initial 90-day timeframe (similar to the 75-day timeframe for TikTok talks that Trump has extended), giving the two countries time to tackle mutual irritants like fentanyl or pre-existing non-tariff trade barriers on both sides.
Bessent has warned that any trading partners that do not negotiate in “good faith” could see a return to the tariff rates initially imposed on April 2. The Chinese government often emphasizes “sincerity” in negotiations, but recent developments raise questions about either side’s commitment to de-escalation.
Rather than pause export restrictions on rare earth minerals, China has simply extended eligibility to some U.S. firms but is said to be too slow issuing export licenses. In the meantime, the U.S. has declared the use of Huawei’s advanced AI chips a violation of American export controls. Both nations are pressing ahead with new, category-specific tariffs, with Beijing imposing anti-dumping duties on certain U.S. plastics and the Trump administration considering anti-subsidy duties on key battery components and levies on pharmaceuticals and active drug ingredients. Time will tell if such actions will be viewed as a breach of the consensus reached in Geneva, or a reflection of deep distrust and longstanding disagreements on trade, national security, and other issues that are unlikely to be significantly eased over the next 90 days.
Despite bipartisan opposition and intense lobbying from affected industries, an early sunset of clean energy provisions in the Inflation Reduction Act seems certain after the 2026 federal budget legislation passed the House with all Republican votes. The final text would phase out consumer EV tax credits at the end of 2025 (except for manufacturers that fall under a 200,000 new EV cap, which would be eligible through 2026). Incentives for clean power projects would phase out as early as 2025 because funds would only be available once a project starts producing energy, as opposed to when construction starts.
As of 2028, most clean energy developers would no longer be able to transfer their tax credits, reducing their ability to raise funds. Credits for wind components would end after 2027, and incentives for all types of clean tech manufacturing would face aggressive “foreign entity of concern” restrictions targeting adversaries like China. All IRA funds for EV, battery, and other clean tech projects not spent by the Energy Department and other federal programs would be reallocated, as would be any leftover EPA diesel emissions reduction funds. (Separately, car loan interest would be tax-free through 2028 for vehicles that are built in the U.S.)
Americans are divided on what should be done about the IRA clean energy provisions, with 44% in favor of removing tax breaks for clean power projects and EV purchases and 39% against. (By contrast, 60% support eliminating taxes on car loan interest.) The issue is just one of several points of contention between conservatives trying to cut spending and reshape federal priorities in line with the Trump administration’s agenda, and moderates pushing to preserve public benefit programs and low-carbon energy jobs their constituents rely on.
The House legislative text is certain to face changes in the Senate, where centrist Republicans, whose votes are critical to passing the package by simple majority, argue that an early phase-out of clean energy tax credits would negatively impact emerging technologies and domestic supply chains. We will be watching the legislation take shape over the next few weeks, and will keep you informed about how the IRA era ultimately ends.
