WASHINGTON — In a significant shift in international tax policy, the United States under President Donald Trump's incoming administration is poised to secure an exemption for American multinational corporations from a global minimum corporate tax agreement that was spearheaded by the Biden administration. The deal, finalized by the Organization for Economic Cooperation and Development (OECD), involves 150 countries agreeing to a 15% global minimum tax rate aimed at curbing tax avoidance by large corporations. According to reports from Yahoo Finance, this exemption would shield U.S. companies from paying higher taxes overseas, potentially preserving billions in revenue for American businesses.
The original agreement, reached in 2021 during Joe Biden's presidency, marked a landmark effort to level the playing field in global taxation. Under the Biden administration, the U.S. played a pivotal role in negotiating the pact, which sought to ensure that multinational enterprises pay a minimum level of tax on their profits regardless of where they operate. The OECD's framework, known as Pillar Two, requires countries to impose a 15% minimum tax on companies with annual revenues exceeding €750 million, approximately $800 million. This initiative was designed to end the race to the bottom in corporate tax rates, where nations competed to offer low taxes to attract business.
Now, with Trump's return to the White House following his victory in the November 2024 election, the dynamics have shifted dramatically. Sources close to the transition team indicate that the U.S. is leveraging its economic influence to negotiate carve-outs specifically for American firms. The exemption would mean U.S. multinationals, such as tech giants like Apple and Google or pharmaceutical leaders like Pfizer, could continue benefiting from lower tax jurisdictions abroad without facing the full brunt of the global minimum. This move comes as Trump has repeatedly criticized international agreements that he views as detrimental to American interests.
Scott Bessent, a prominent hedge fund manager and a key economic advisor to Trump who has been floated as a potential Treasury secretary, hailed the development as a major win. In a statement reported by Yahoo Finance, Bessent called it “a historic victory in preserving U.S. sovereignty and protecting American workers and businesses from extraterritorial overreach.” Bessent, whose firm Key Square Group manages billions in assets, emphasized that the exemption aligns with Trump's America First agenda, prioritizing domestic economic growth over multilateral commitments.
The contrast between the two administrations' approaches could not be starker. During Biden's term, U.S. Treasury Secretary Janet Yellen was instrumental in forging the OECD consensus. In October 2021, Yellen announced the breakthrough in Rome, where finance ministers from over 130 countries endorsed the plan. “This is a historic agreement that levels the playing field for American businesses,” Yellen said at the time, according to OECD records. The deal was seen as a victory for fair taxation, potentially generating up to $150 billion in additional global tax revenue annually, with the U.S. expecting to collect around $30 billion more each year from foreign profits of its companies.
Critics of the Biden-era pact, however, argued that it imposed undue burdens on U.S. firms already facing competitive disadvantages. Republican lawmakers, including Senate Finance Committee Ranking Member Mike Crapo, had expressed reservations during negotiations, warning that the agreement could disadvantage American innovation. “We must ensure that any global tax deal protects U.S. taxpayers and does not cede control to foreign entities,” Crapo stated in a 2021 letter to Yellen. Now, with a Republican-controlled Congress and Trump's administration, those concerns appear to be gaining traction.
The specifics of the exemption remain under negotiation, but reports suggest it could involve the U.S. opting out of enforcing the global minimum on its own soil for domestic purposes while still benefiting from the broader framework. The OECD deal's implementation is set to begin in 2024 for some provisions, with full rollout by 2025. According to the Yahoo Finance article, the exemption would exempt U.S. multinationals from additional overseas taxes, allowing them to maintain profit-shifting strategies that have long been a point of contention in international finance.
International reactions to the potential U.S. exemption have been mixed. European Union officials, who have been strong proponents of the global tax, expressed disappointment. French Finance Minister Bruno Le Maire, a key architect of the deal, told reporters in Paris last week that any unilateral exemptions could undermine the agreement's integrity. “The U.S. commitment was essential; walking back now risks unraveling the entire framework,” Le Maire said, according to a statement from the French Finance Ministry. Meanwhile, countries like Ireland and the Netherlands, which have relied on low corporate taxes to attract investment, quietly welcome the flexibility it might afford.
From an economic perspective, the exemption could have far-reaching effects. The OECD estimates that without the minimum tax, multinationals shift about $1 trillion in profits to low-tax havens annually. For the U.S., enforcing the deal would have meant taxing foreign earnings at home if foreign rates fell below 15%, a provision that could have raised significant revenue for infrastructure and social programs under Biden. Analysts at the Tax Policy Center project that the exemption might cost the U.S. Treasury up to $20 billion per year in forgone revenue, though proponents argue it prevents capital flight and job losses.
Trump's broader tax agenda provides additional context for this development. During his first term, the 2017 Tax Cuts and Jobs Act slashed the U.S. corporate rate from 35% to 21%, boosting stock markets but widening deficits. Trump has promised further cuts, potentially to 15%, in his second term. Integrating the OECD exemption into this plan would reinforce his pro-business stance. At a campaign rally in Appleton, Wisconsin, on October 15, 2024, Trump vowed, “We're going to bring back American jobs and stop foreign governments from taxing our companies into oblivion.” The Appleton Times, covering local impacts, notes that Wisconsin-based firms like Harley-Davidson and Oshkosh Corporation could see direct benefits from reduced overseas tax liabilities.
Labor groups and progressive advocates, however, decry the move as a giveaway to the wealthy. The Institute on Taxation and Economic Policy (ITEP) released a report last month estimating that the top 1% of corporations would save $100 billion over a decade from such exemptions. “This is corporate welfare at its finest, funded by everyday taxpayers,” said ITEP executive director Steve Wamhoff in an interview with the Times. On the other side, the U.S. Chamber of Commerce praised the policy shift. “Protecting American competitiveness is paramount,” said Chamber president Suzanne Clark in a November 2024 statement.
As negotiations continue in Paris, where the OECD is headquartered, the world watches closely. The incoming Trump administration has signaled it will review all international pacts, including trade deals like the USMCA. Treasury officials from the Biden era, speaking off the record, expressed frustration that the groundwork laid over years could be dismantled. “We built this consensus brick by brick; exemptions erode trust,” one former official said.
Looking ahead, the exemption's success hinges on OECD buy-in. While the U.S. wields veto power in such forums due to its economic clout, alienating allies could complicate other global issues, from climate finance to security cooperation. Economists warn of a potential domino effect, with other nations seeking similar carve-outs. A report from the International Monetary Fund, released December 5, 2024, cautions that fragmented implementation could reduce the deal's projected $220 billion in annual global revenue by half.
For American workers and consumers, the implications are twofold. On one hand, exempted corporations might invest more domestically, creating jobs in sectors like manufacturing and tech. On the other, lost tax revenue could strain public services, from roads to education. In states like Wisconsin, where multinational headquarters dot the landscape, the debate rages in local boardrooms and union halls alike.
As the January 20, 2025, inauguration approaches, the tax exemption stands as a bellwether for Trump's economic vision. Whether it fortifies U.S. sovereignty or isolates America on the world stage remains to be seen. For now, the story underscores the volatile interplay of domestic politics and global economics, with billions in stakes.