President Trump laid out an ambitious plan on Tuesday night to forge a new American economy with sweeping tax cuts and regulatory relief for domestic production while imposing tariffs on products made outside of the U.S.
Trump detailed far-reaching plans to revitalize American manufacturing by cutting taxes on companies that produce goods in the U.S., allowing capital investments to be immediately expensed, extending interest rate tax deductions to include auto loans of American-made cars, and levying reciprocal tariffs on countries that impose tariffs on U.S. goods and protective tariffs on strategic commodities.
“We are going to rediscover the unstoppable power of the American spirit,” Trump said in an address to U.S. Senate and House of Representatives.
Taken together, the trade and economic initiatives announced by Trump and those pursued in his first six weeks in office amount to a pioneering new approach to the American economy—a breathtaking break with the painful economic past not seen since Franklin D. Roosevelt’s first inaugural speech on March 4th ninety-two years ago.
Trump said that the status quo global trading system that has led to decades of rising trade deficits has hurt the U.S., pointing out that “friend and foe” trading partners tend to have much higher tariffs on the U.S. than the U.S. has on their goods.
“This system is not fair to the United States and it never was,” Trump said.
Trump also elaborated on his promise to impose reciprocal tariffs on countries around the world that tariff U.S. goods. Under reciprocal tariffs, the U.S. would match the tariffs other countries impose.
“On April 2nd, reciprocal tariffs kick in. Whatever they tariff us, we will tariff them,” Trump said.
The president also promised to mirror the nontariff barriers that block U.S. goods from entering foreign markets. Many countries around the world exclude U.S. products by imposing burdensome requirements or outright banning imports.
Earlier on Tuesday, the Trump administration made good on the promise to impose 25 percent tariffs on Canada and Mexico. In his address to Congress, Trump touted the tariffs as a way of winning more cooperation on America’s northern and southern borders in fighting fentanyl smuggling and illegal immigration. He also pointed to long-running trade deficits with those two countries, describing these as subsidies for their economy.
“We pay subsidies to Mexicao and Canada of hundreds of billions of dollars. And the United States, we’re not going to do it any longer,” Trump said.
Building on his trade agenda, Trump reiterated his call for large new tax cuts in addition to the extension of expiring tax cuts passed during his first administration. Trump has said he wants to lower the business tax rate for domestic manufacturers to 15 percent. He also proposed restoring 100 percent expensing of capital investments, a key element of his first-term tax cuts that he credited with spurring economic growth.
In a new proposal, Trump also said that interest on auto loans should be deductible—so long as the cars and trucks purchased are made in the U.S.
Trump plans to make car loan interest tax-deductible for American-made vehicles.pic.twitter.com/yq5M4Qengd
— Josh Caplan (@joshdcaplan) March 5, 2025
Trump struck an optimistic tone, pointing to recent announcements from companies such as Oracle, Apple, Honda, and Taiwan Semiconductor, which are investing hundreds of billions of dollars in U.S. production to avoid tariffs. Major U.S. and foreign corporations are ramping up U.S. production to sidestep tariffs, demonstrating the policy’s effectiveness in reshoring manufacturing.
Trump positioned his trade policies as a market-driven alternative to the Chips Act, a signature piece of Biden era legislation which provided over $52 billion in subsidies for technology manufacturing and research but failed to deliver sustained growth in manufacturing employment or output. While it spurred a surge in construction spending, manufacturing employment stagnated and the manufacturing sector’s output contracted for 26 straight months. Since Trump took office, manufacturing has expanded for two months.
“Your Chips Act is a horrible, horrible thing,” he said to Democrats, calling for its repeal. He said the spending authorized by the Chips Act should be redirected to deficit reduction.
Trump said his tariff plans were sparking a revival of manufacturing without spending taxpayer dollars.
“They will come because they don’t have to pay tariffs if they build in America,” Trump said.
Trump unveiled plans to impose 25 percent tariffs on imports of aluminum, copper, lumber, and steel, saying they would protect America’s strategic interests. He also said he would soon be releasing plans to revive rare earth mining and production in the U.S.
“We are going to renew the unlimited promise of the American dream,” Trump said.
