Tariffs target China, roil U.S.

Author: The Carta Policy Team
Published date: April 11, 2025

Startups and investors may have diminished access to capital during the current uncertainty—but more nimble enterprises may be able to adapt better and seize opportunities more quickly than legacy competitors.

Topline

Tariff tension targets China
SEC confirmed…the push for private markets
Carta Policy in San Francisco
Tax policy moves to next phase of process
Curious about how to save on taxes? QSBS virtual event
Quick hits

Tariff tension targeted at China

President Trump reinforced his focus on China, revamping his initial broad application of tariffs to almost every nation to an almost singular focus on China.

How we got here: When globalization started in the late 19th century…kidding…we are not going that far back. On April 2, President Trump announced widespread and aggressive tariffs across the globe. Stock markets plummeted losing trillions in value, planned IPOs and large-scale investment projects were scrapped, and other countries— including our closest allies—announced retaliatory measures. Reportedly, none of this fazed the president. Then the bond market said hello.

“I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.”
—James Carville, 1992

Turns out to still be true 30 years later. Bond yields surged and the president announced a 90-day delay on tariffs for most countries to allow for negotiations, though the 10% across-the-board levy remains in place. The exception: China, where we’ve seen a massive escalation. What started as a 54% levy under the initial “Liberation Day” announcement has escalated to 145% as of this writing. China, in turn, has imposed a 125% duty on U.S. imports.

Market reaction: President Trump’s decision to delay the majority of tariffs met with initial widespread relief, but that was short-lived. Markets sank again, Treasury yields rose (as investors sold the bonds—price and yield are inversely related), and consumer confidence plunged. Strip away all the noise and the meandering path to get here and the reality is that the U.S. imposed a 145% tariff on China and China retaliated with a 125% duty. We are on course for an escalating trade war with the world’s second largest economy and a major trading partner.

Path forward: The administration has articulated a number of factors that drove its tariffs policy—reversing a trade imbalance; raising capital to pay for U.S. spending; improving U.S. manufacturing; addressing fentanyl coming from China; improving our strategic position with respect to China. Assuming the best intent and best arguments for each, they have yet to home in on a central objective. It will be important for the administration to clearly articulate its focus to rally U.S. consumers and businesses—who will start paying higher prices and face economic headwinds—to the cause. If this case is not clear, the resulting economic fallout will be more difficult to bear, and as we saw over these past few days it could fracture the Republican conference. Understanding the focus will also help inform what possible paths are available to resolve the growing tension.

Why it matters: The policy decision has roiled markets and injected uncertainty. Tariffs may result in higher prices and slower growth. For sure, they have resulted in uncertainty, which tends to slow lending and investment. This means startups, growth-stage companies, and their investors may have diminished access to capital. M&A may remain tepid, and the paused IPOs may stay paused. But given the uncertain dynamics, more nimble enterprises like startups and growth-stage companies can adapt better and seize opportunities more quickly than their more traditional, legacy competitors. Easier said than done, we know, but we are cheering you on…and hopefully helping provide policy insights to navigate the dynamic environment.

Atkins set to take the SEC reins with a focus on capital formation

This week, the Senate confirmed Paul Atkins to lead the SEC. Atkins is expected to narrow both the agency’s rulemaking agenda and its enforcement posture to target specific harms rather than broad sweeps. Atkins’s policy priorities are expected to include:

Developing a principled regulatory framework for digital assets
Re-examining the JOBS Act to boost capital formation
Addressing barriers for companies to go public, including litigation risk and corporate governance reforms
Expanding retail access to private markets by modernizing the accredited investor standard and structured access to private funds.

Many of these issues were covered at the SEC’s Small Business Forum this week and included as part of Carta’s recommendations to the forum. And we have a real opportunity under Atkins’s leadership to accomplish some of these goals.

Clean(ish) slate: Acting Chairman Mark Uyeda has already rolled back many Gensler-era rules and guidance, as well as implemented new enforcement procedures to give the commission more oversight in the process. Under Uyeda, the SEC also has:

Provided guidance: Eased requirements for private companies and funds to raise capital under Rule 506(c) general solicitation and clarified marketing rule compliance for private funds.
Offered clarity on crypto: Established a crypto task force, hosted industry roundtables and discussions, and issued guidance (more on that below).
Activated workstreams—directed staff to:
- review opportunities to improve the exempt offering framework, including improvements to crowdfunding to bolster its utility, pathways to expand retail investor participation in the private markets through modifications to the accredited investor definition, and increased exposure to private fund investment vehicles.
- review the federal/state divide on investment adviser oversight and secondary trading.

Put simply, Atkins will build on these areas rather than spend the near term focused solely on reversing Gensler-era actions (though the tariff-related market disruption will surely take up some of his schedule).

Why it matters: The SEC is open for business. As an ecosystem, we have an opportunity to help shape a regulatory framework that opens access to private capital in a responsible and sustainable way. But the agency has limited resources and competing priorities, including policy workstreams on digital assets, public market disclosures, and corporate governance. Engagement will be key to ensure capital formation remains a priority.

Engagement: Carta is engaging policymakers to:

Expand investor access: expand on-ramps to become an accredited investor and enable more investors to access private markets through professionally managed funds.
Bolster private funds: increase investor limits for VC funds and expand VC funds’ ability to make fund-of-fund and secondary investments.
Modernize regulation: update the existing private market regulatory framework to reflect evolving market expectations, technology, and practices.

Carta Policy hits San Francisco

Carta hosted our latest policy dinner this week at Acquerello in San Francisco. We had a great group of funds and partners to discuss the politics and policy around tariffs, tax reform, the SEC agenda, AI, and so much more, as well as how best to navigate the shifting environment. We also enjoyed toasting our customers at JAX Vineyards and providing some insights around the policy environment and what to expect in the new administration.

Congress agrees on reconciliation, unlocking tax policy path

The House and Senate passed Budget Reconciliation instructions, which enables them to pass a tax reform bill with a simple (Republican-only) majority. If Congress fails to act, provisions from the Tax Cuts and Jobs Act (TCJA) will expire, increasing taxes on the majority of Americans by a total of $4.5 trillion.

The pressure point: Policymakers are committed to passing a tax bill—the struggle has been how much of it to pay for and how to pay for it. The CBO estimates a $6 trillion price tag to extend expiring TCJA provisions plus Trump’s other initiatives. The budget resolution would enable Congress to spend $4 trillion, but require them to cut $1.5 trillion in spending. That is the “how much” to pay for. Now we focus on the “how to” pay for it.

Why it matters: Policymakers may support our policies, but they need to pay for tax reform. So items core to our ecosystem are under scrutiny. We formed a coalition—the Innovator Alliance—to advocate on R&D expensing, Qualified Small Business Stock, and carried interest. Congress likely restores R&D expensing. Preserving QSBS appears to be in good shape. Carried interest remains under fire with the president interested in curtailing it. More to come, but engagement will matter.

What’s next: Expect the House to start pushing forward on tax policy proposals as soon as late April/early May, aiming to pass legislation by June. The complicating factor is the House will want to informally coordinate with the Senate to ensure there is alignment on the final package. This may slow progress. This is really the start of the hard part, and that will take time—but expect action to pick up.

Join Carta's virtual event on taxes

Tax can make or break your bottom line—especially in a shifting policy landscape. Join Carta’s tax experts for a live webinar on April 30 to debrief the 2025 tax season and help your startup stay ahead of what’s next. We’ll cover the common pitfalls startups faced this season, explain what potential tax changes could mean for your company, and explore how strategies like QSBS can play a critical role in founder tax savings and employee retention.

Quick hits

Crypto corner:
- Crypto broker tax rules are dead. Trump signed legislation that repealed IRS crypto tax reporting rules that expanded the definition of a broker to include DeFi exchanges, marking the first crypto bill to be signed into law.
- SEC issues guidance on stablecoins and crypto offerings: Stablecoins that are designed to maintain a one-to-one value with the U.S. dollar and are backed by low-risk, liquid reserves that equal or exceed the value in circulation are not securities. Staff also provided insights around disclosure obligations connected to registered or qualified offerings of digital asset securities.
- A Blueprint for Digital Assets in America. The chairmen of the House Financial Services and Agriculture Committees outlined their principles for a digital asset market structure framework, including providing clarity around the classification of assets, a framework for issuing new assets, and establishing authority to regulate the spot markets and intermediaries. Both committees kicked off their workstreams on a framework this week.
Trump directs agencies to quietly repeal regulations. President Trump issued a directive for agencies to repeal any “unlawful” regulations without going through the traditional notice and comment process. The Administrative Procedures Act (APA) requires agencies to issue public notice and rationale for changing or repealing existing regulations, but the memo points to a “good cause” exception that allows agencies to skip the process if "impracticable, unnecessary, or contrary to the public interest.” Any efforts pursued by agencies without following traditional APA procedures will undoubtedly be challenged in court, but expect to see agencies pursue this path to dismantle the existing regulatory state.

Author: The Carta Policy Team

Carta’s Policy Team aims to connect the policymaking community and venture ecosystem to build an ownership economy and advance policies that support private companies, their employees, and their investors.