Implement a Market Access Charge

Estimated Revenue:
$2 trillion

2025–2034. This score is based on an assumption of $50–60 trillion in annual capital inflows taxed at a constant rate of 50 basis points over ten years ($250–300 billion x 10), and adjusted downward to reflect an expected decline in capital inflows as a result of the new charge. An alternative score prepared by John R. Hansen, Ph.D., to support introduction of the Baldwin-Hawley bill estimates an average revenue of $460 billion per year for the five years after the market access charge is implemented. Policymakers should request a formal score of this proposal from the Congressional Budget Office.

Summary

Since the United States entered the World Trade Organization agreements in 1994, the U.S. trade deficit has risen from $70 billion in 1993 to over $900 billion in 2024. This proposal would impose a straightforward market access charge on incoming foreign capital flows starting at a rate of 50 basis points. If America continues to run a trade deficit, the charge will increase by 50 basis points the following year (or every six months) until a trade balance or surplus is reached. The charge would then decrease the year after a surplus is achieved.

Cumulative trade deficits have driven down America’s net foreign asset position—U.S. foreign liabilities versus foreign assets—to negative $23 trillion. At the same time, the U.S. has seen a 10% decline in industrial output (excluding inflated gains from computer processing improvements) and a 35% decline in production manufacturing jobs since 2000. A market access charge would make the foreign purchase of U.S. financial assets more expensive, making the purchase of American exports relatively more attractive. This approach would simultaneously promote U.S. production and industrial strength, serve as a source of revenue, and counteract forces driving the trade deficit.

The Case for Implementing a Market Access Charge

The U.S. trade deficit is the result of importing far more than we export. Instead of trading goods produced abroad for ones made in America, other nations often prefer to trade their products for our assets, including corporate equity, real estate, and Treasury debt. The trade deficit is driven higher by the unfair trade practices by U.S. trading partners, U.S. leaders’ historic failure to respond, and the failure of the dollar to adjust against foreign currencies in response to trade imbalances. 

Some argue that trade deficits are balanced by foreign investment of dollars back into the United States, but this confuses simple acquisition of American assets with productive investment that expands U.S. industrial capacity. Over 95% of foreign direct investment falls into the former category. Large imbalances in these investments drive up the value of the dollar, making U.S. exports relatively more expensive and imports relatively cheaper. A market access charge would help balance world demand for U.S. assets and goods to ensure surges of foreign “investment” don’t continue to drive up trade deficits at the expense of U.S. jobs and industries. This charge would also be paid directly by foreign investors.

The Coalition for a Prosperous America has proposed a market access charge on foreign purchases of dollar-denominated American financial assets. Sens. Tammy Baldwin (D-WI) and Josh Hawley (R-MO) have formalized this proposal in their Competitive Dollar for Jobs and Prosperity Act.