2025

This paper analyzes the implications of Donald Trump’s proposed 25% across-the-board tariff on U.S. imports, including those from Canada, framing it as a fundamental break from the post-WWII U.S.-led trade system. While past retaliatory tariffs—such as those in response to Trump’s steel and aluminum duties—were effective in prompting reversals, the current geopolitical and ideological climate suggests retaliation may no longer yield the same results. A new populist trade narrative in the U.S., centered on deindustrialization, national security, and anti-globalization sentiment, particularly with regard to China, indicates that protectionism may be entrenched for the long term. Given this shift and the potential for a prolonged disruption to North American trade, the paper proposes a resilient Canadian policy response modeled on past crisis management strategies and the long-term success of firms like Lincoln Electric. Key recommendations include: strengthening the social safety net, especially in anticipation of AI-driven labor disruptions; investing in modern infrastructure; accelerating innovation in the intangibles economy; and supporting domestic start-ups by redirecting subsidies away from foreign multinationals. This approach aims to reduce vulnerability to U.S. trade shocks and build a self-sustaining, innovation-driven Canadian economy.

This article examines three recent court decisions—Toulouse, Christensen, and Bruyea—that address whether U.S. tax treaties provide an independent basis for claiming a foreign tax credit against the Net Investment Income Tax (NIIT), which is not creditable under the Internal Revenue Code. In Toulouse, the Tax Court denied a treaty-based credit, while in Christensen, the Court of Federal Claims reached the opposite conclusion, distinguishing Toulouse. The Bruyea decision went further, broadly permitting the credit and, crucially, addressing whether the NIIT constitutes a treaty override. The court's reasoning in Bruyea raises the broader and potentially far-reaching implication that no 21st-century U.S. tax legislation—such as the BEAT (Base Erosion and Anti-Abuse Tax)—overrides U.S. treaty obligations. Given the substantial revenue consequences of holding that BEAT and similar provisions may not apply to treaty residents, the article argues that Congress must clarify the relationship between newer tax laws and existing treaty commitments in upcoming tax legislation.

This paper analyzes the economic impact of trade frictions between the U.S., Canada, Mexico, and China using a computable general equilibrium (CGE) model that incorporates Armington elasticity and the Eaton-Kortum approach. By simulating various tariff scenarios and retaliatory measures, the study finds that tariff increases lead to GDP declines of up to 16.5% for Canada, 6.6% for Mexico, 0.3% for China, and 0.19% for the U.S., while benefiting major trading partners of these nations. The results show that retaliatory tariffs do not significantly mitigate economic losses for Mexico, Canada, or China. Additionally, the study challenges the assumption that trade frictions promote domestic production in the U.S., revealing that broad-based tariffs on Canada, Mexico, and China could instead reduce U.S. import and export trade flows, prompting global trade to bypass the U.S. altogether. These findings underscore the unintended consequences of protectionist policies and highlight the shifting dynamics of global trade.

This study examines the economic impact of geo-economic fragmentation (GEF) and the disintegration of global value chains (GVCs) driven by geopolitical tensions and supply chain disruptions. As nations adopt near-shoring and friend-shoring strategies to enhance supply chain resilience, the shift toward de-globalization accelerates. Using a multi-country, multi-sector computable general equilibrium (CGE) model that incorporates global production networks, the study quantifies the economic costs of friend-shoring. The findings reveal that economies engaging in friend-shoring incur significant economic losses, with real GDP declines exceeding 20% in some cases. The severity of these effects depends on trade dependency, reliance on key trading partners, and a country’s strategic role within global production networks. Notably, the study finds that countries with higher centrality in global trade networks face lower economic costs. In China, the extensive and diversified trade in goods and intermediate products helps mitigate the risks of trade disruptions, buffering the impact of friend-shoring strategies.

This paper examines the impact of strategic trade policy interventions, specifically tariffs, on wages and welfare using a two-country general oligopolistic equilibrium (GOLE) model. Contrary to findings in partial equilibrium frameworks, the study finds that tariffs do not affect domestic wages and instead reduce the welfare of the tariff-imposing country. It further explores whether tariff revenue can compensate affected workers and finds that when only final goods are traded, worker compensation is feasible beyond a specific tariff threshold, which depends on foreign tariff rates. However, when both final and intermediate goods are traded, the results reverse, meaning that tariff revenue can only compensate workers up to a certain tariff level, as tariffs may lower overall labor demand. These findings are policy-relevant in light of the growing integration of developing economies into Global Value Chains (GVCs) and the renewed use of tariff protectionism worldwide, highlighting the potential trade-offs between protectionist policies and labor market outcomes.

This paper examines the Trump administration's potential use of Section 891 of the Internal Revenue Code and pending legislation as tools to impose retaliatory taxes on foreign countries that enact “discriminatory or extraterritorial” taxes targeting U.S. multinationals. Section 891, a rarely invoked provision, allows the U.S. to double the tax rates on corporations and individuals from countries that impose discriminatory taxation on U.S. businesses.

This paper examines mandatory binding arbitration as a dispute resolution mechanism in the post-BEPS landscape, particularly in the context of African countries implementing the OECD’s tax reforms. This paper evaluates the benefits and risks of arbitration, particularly within the realities of African tax systems, and ultimately advocates for its adoption as the preferred dispute resolution mechanism despite existing concerns. It argues that arbitration offers a more efficient, predictable, and enforceable approach to resolving tax disputes, positioning African countries to navigate the complexities of the post-BEPS international tax framework effectively.

This article examines how states respond to foreign economic coercion, arguing that sanctions trigger broader security concerns that incentivize governments to protect a wide range of domestic firms, not just those directly targeted. Using an original dataset of U.S.-sanctioned Chinese firms, the study explores how China shields its industries from U.S. sanctions. The research finds that China not only subsidizes sanctioned firms but also extends support to other domestic firms competing for the same government contracts. This protective strategy ensures supply chain resilience and encourages domestic firms to maintain normal business operations within sanctioned industries. The findings offer new insights into the intersection of geopolitics and industrial policy, illustrating how governments leverage state intervention to counteract economic warfare and sustain strategic industries.

This report examines the economic implications of escalating trade tensions in North America, focusing on the Trump administration’s tariff policies. At the time of publication, the administration had threatened and then paused a 25 percent tariff on Canadian and Mexican goods, prompting retaliatory preparations from both countries. Following the pause, Trump proceeded with a 25 percent import tax on steel and aluminum starting in March 2025, alongside plans for reciprocal tariffs on U.S. trading partners. The report documents varying perspectives on these trade conflicts and analyzes their broader economic consequences for North America and beyond, highlighting the potential disruptions and policy responses shaping international trade dynamics.

This commentary analyzes the CJEU’s decision of September 10, 2024, which overturned the General Court’s previous ruling in the Apple State aid case, ordering Apple to repay €13 billion plus interest to Ireland for unlawful State aid. The focus is on the Commission’s primary line of reasoning, which formed the basis of the appeal, divided into three key aspects: (i) the General Court’s misinterpretation of the Commission’s profit allocation analysis for Apple’s Irish branches (ASI and AOE), (ii) its treatment of Apple Inc.’s functions in profit allocation, and (iii) its infringement of the separate entity approach, the arm’s length standard (ALS), and Article 107 TFEU. The commentary concludes that the CJEU’s decision is problematic from a strict legal perspective for several reasons. First, it implicitly confirms that the Commission has a new prerogative to use the ALS (as outlined in the AOA) to assess Member States’ profit allocations. Second, it treats transfer pricing as an exact science, allowing the Commission to scrutinize methodological errors in determining the "correct" profit allocation. Third, it raises concerns about the burden of proof in State aid cases, creating uncertainty in legal standards. Finally, it illustrates how legal rules can be molded to serve political interests, as in this case, where anti-avoidance concerns were effectively disguised as anti-subsidy enforcement.

This article examines the relationship between the U.S. current-account deficit with China and its capital-account surplus, highlighting how U.S. tax policy influences capital inflows and trade imbalances. While it is widely understood that reducing imports from China would lower capital inflows, the article argues that the reverse is also true—eliminating U.S. tax subsidies for foreign capital imports would reduce Chinese investment in U.S. assets, thereby decreasing China’s incentive to export goods to the U.S. in exchange for dollars. The authors propose a series of tax reforms aimed at reducing the returns on U.S. portfolio investments by Chinese entities, including the Chinese government and its sovereign wealth fund. These reforms could lower China’s goods-trade surplus with the U.S. by 16% while avoiding the tariffs' economic drawbacks. Additionally, these reforms could increase foreign tax revenue, support U.S. domestic production, and help retain American assets within the U.S.