Trump, Starmer Announce 'Historic' US-UK Trade Deal—But Tariffs Persist

Economic

Summary:

President Donald Trump and Prime Minister Keir Starmer unveiled a limited U.S.-UK trade deal hailed as "historic" by both leaders. The agreement marks the first bilateral deal since Trump reignited a global trade war...

A Deal Framed as a Breakthrough—With Limits

In a joint announcement on Thursday, U.S. President Donald Trump and British Prime Minister Keir Starmer presented what they described as a “breakthrough” in transatlantic trade ties. The bilateral agreement—reached amid escalating global tariff battles—lowers U.S. duties on some British auto and steel exports and expands mutual access to select agricultural goods. However, the 10% baseline tariff on most UK exports to the U.S. will remain, tempering expectations of a broader economic boost.

Trump, speaking from the Oval Office, emphasized the size of the U.S. market and said Britain had made a “good deal,” but warned other nations with larger trade surpluses might face harsher terms. Starmer, joining by speakerphone, called it a “fantastic, historic day,” citing its announcement on the anniversary of VE Day as symbolically powerful.

What's in the Deal? A Mixed Bag for Both Sides

The deal includes a range of tariff adjustments and market access provisions:

Automotive: U.S. tariffs on British car imports will drop from 27.5% to 10% for up to 100,000 vehicles annually—roughly the total UK exports to the U.S. in 2024.

Steel and Ethanol: U.S. duties on UK steel will fall from 25% to zero, and Britain's 19% tariff on U.S. ethanol will be scrapped within a large import quota.

Agriculture: UK farmers gain a first-ever tariff-free quota for 13,000 metric tonnes of U.S. beef, although beef treated with growth hormones remains banned under UK food safety rules.

Pharmaceuticals: While no new tariffs were detailed, the U.S. pledged "secure supply chain" treatment and preferential handling under Section 232 investigations—potentially easing pressure on firms like GSK and AstraZeneca.

Despite the gains, the British-American Business group expressed concern over the continued 10% tariffs and said the deal fell short of fully unlocking transatlantic economic integration, especially in digital trade and services.

Political Messaging and Economic Realities

The announcement comes as Trump faces pressure to de-escalate trade tensions he has reignited with a sweeping wave of reciprocal tariffs against 57 countries—including the EU—on goods ranging from copper to films. On Wednesday, he reaffirmed that further tariffs on foreign-made movies were under consideration, though UK officials said Britain might be exempt.

Commerce Secretary Howard Lutnick said the UK deal alone could open up $5 billion in new U.S. export opportunities annually, while the U.S. government anticipates $6 billion in revenue from retained tariffs. On Wall Street, stocks rallied briefly, with airline and industrial shares surging—fueled by news that Rolls-Royce engines would enter the U.S. duty-free.

Nonetheless, economists and business leaders remain cautious. The deal, while politically significant, is not expected to meaningfully move the economic needle in the short term. Still, the symbolism of thawing trade ties may lift investor sentiment, especially as Trump’s team prepares for critical talks with China this weekend in Switzerland.

Next Steps and Unfinished Business

British officials underscored that the current agreement is not a comprehensive free trade deal but a starting point. Talks remain unresolved on contentious issues such as the UK's digital services tax and broader digital economy provisions. Meanwhile, Trump’s negotiating team is pursuing more than a dozen deals globally, aiming to rebalance trade flows and demonstrate progress ahead of a self-imposed July deadline for tariff re-evaluation.

With British exporters like Jaguar Land Rover having paused U.S. shipments and British Steel nationalized to survive tariff shocks, Starmer’s government is under pressure to secure more durable, growth-enhancing arrangements. In parallel, the UK has also finalized a free trade agreement with India, indicating its multi-pronged post-Brexit trade strategy.

Source: Reuters

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Economic

Forex

Real Wages Under Pressure as Inflation Persists

According to data released by Japan's Ministry of Health, Labour and Welfare, real wages—adjusted for inflation—dropped by 2.1% in March compared to the previous year. This marks a deepening trend after declines of 1.5% in February and 2.8% in January, driven primarily by persistent food inflation. The inflation rate used in wage calculations, which includes volatile fresh food but excludes rent, remained high at 4.2% in March.

Although base salaries rose by 1.3%, consistent with the previous month, overtime pay—a barometer for business momentum—fell 1.1%. This was the first contraction since September and the sharpest drop since April 2024, raising concerns about a softening labor market. Meanwhile, nominal wages rose 2.1% to an average of 308,572 yen ($2,132), a slower pace than February’s revised 2.7% gain.

Household Spending Surprises to the Upside

Despite weaker real income, Japan’s consumer spending defied expectations. Data from the Internal Affairs Ministry showed household expenditures rose 2.1% in March year-on-year, far exceeding the market consensus of just 0.2%. Seasonally adjusted monthly spending was also up by 0.4%, reversing an expected decline.

The increase was driven largely by spending on utilities and entertainment. Still, officials noted that Japanese households continued to cut back on food spending due to persistent price hikes—an ongoing drag on broad-based consumption.

Outlook: Hope for Recovery Clouded by Tariff Risks

Masato Koike, senior economist at Sompo Institute Plus, forecasted that real wages could return to positive growth in the coming months, citing falling oil prices and a stronger yen as potential stabilizers for inflation. Moreover, major Japanese firms had agreed to over 5% wage hikes during spring labor negotiations, but the effect will likely be reflected starting in April’s data.

Yet optimism remains fragile. Koike and others warned that escalating global trade tensions—particularly stemming from new U.S. tariffs—could weaken Japan’s wage growth momentum and erode consumer confidence. This concern comes amid expectations that Japan's GDP for the first quarter will show a contraction.

Japan finds itself at a critical juncture: while nominal pay growth and recent consumer spending offer hope, real wage erosion and global trade uncertainty pose structural challenges. With household purchasing power still under pressure and economic sentiment hinging on geopolitical developments, policymakers may have limited room to stimulate domestic demand in the short term.

Source: Reuters

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Forex

Economic

Dollar Strengthens Ahead of Crucial U.S.-China Talks

Heading into the weekend, the greenback is on track for a solid weekly gain, supported by hopes that a newly announced U.S.-U.K. trade deal could signal a broader thaw in global trade tensions, particularly with China. With high-level trade talks between Washington and Beijing scheduled to begin Saturday in Switzerland, investors have grown more upbeat about the possibility of reduced tariffs and smoother international commerce.

While the euro held steady in Asian trading on Friday at $1.1217, it was still down 0.6% for the week. The yen weakened roughly 0.7% this week and briefly touched a one-month low of 146.18 to the dollar before stabilizing around 145.78. The British pound, which initially rallied on anticipation of a U.S.-U.K. breakthrough, slipped to a three-week low of $1.3220 after details revealed the deal was narrower than expected.

According to Steve Englander of Standard Chartered, the market’s dollar-buying response likely stems from hopes that other trade deals — particularly with China — are “doable,” helping reduce perceived risk around global supply chains and inflation shocks.

Tariff Rollbacks and Trade Hopes Reignite Risk Appetite

President Trump, while announcing the U.K. deal, suggested that upcoming China talks could be substantive, and hinted that the current 145% tariffs on Chinese goods might be reduced. Though unconfirmed reports, including one from the New York Post, suggested a potential halving of tariffs, the White House has so far dismissed such speculation. Nevertheless, the market has interpreted the shift in tone as a possible sign of de-escalation, prompting a return to riskier assets.

Bitcoin’s rally past $100,000 — its highest since early February — underscores this broader risk-on sentiment. Investors appear to be rebalancing portfolios toward speculative corners of the market, encouraged by the idea that the global economy may avoid the worst-case scenarios of protracted trade wars.

Diverging Currency Movements: G10 vs. Asia

Despite the dollar’s strength against most G10 peers, including the euro, yen, and pound, it retreated against several Asian currencies this week. The Taiwan dollar surged more than 6% since the end of April amid speculation of trade realignments and currency interventions. It has now stabilized around 30 to the U.S. dollar. The Singapore dollar remains near decade highs, while the Hong Kong dollar eased back within its peg band after heavy intervention from its monetary authority.

Meanwhile, the Australian and New Zealand dollars weakened, down 0.7% each to $0.6391 and $0.5892 respectively, marking the Aussie’s first weekly drop in a month.

Rate Cut Hopes Fade as Fed Signals Patience

On the monetary policy front, the Federal Reserve’s decision to hold rates steady this week came as no surprise. However, Fed Chair Jerome Powell’s cautious comments regarding uncertainty in the U.S. economy cooled speculation about an imminent rate cut. As a result, the market-implied probability of a rate cut in June has fallen sharply to just 17%, compared to 55% a week ago.

This aligns the Fed more closely with its European and Nordic counterparts — the ECB, Norges Bank, and Riksbank — which also left rates unchanged. In contrast, the Bank of England moved to cut rates, citing slowing inflation and growth momentum.

As markets turn their focus to the weekend’s U.S.-China summit, traders will be looking for concrete signs of tariff relief or renewed trade alignment. Any significant movement on that front could determine whether the dollar continues its upward march or sees a reversal amid renewed global optimism.

Source: Reuters

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Daily News

[Quick Facts]

The US and the UK reached a trade agreement, although specifics remain pending

Trump seeks to raise taxes on wealthy people earning US$2.5 million or more a year

U.S. consumers' medium-term inflation expectations rise to a nearly three-year high

Despite the Bank of England's rate cut, underlying challenges are evident

Three major U.S. automakers are dissatisfied with lower tariffs on U.K. imports

Trump calls for a 30-day unconditional ceasefire in the Russia-Ukraine conflict, signaling the potential for additional sanctions

Modi speaks out after India-Pakistan conflict escalates

[News Details]

The US and the UK reached a trade agreement, although specifics remain pending

President Trump announced at the White House on the 8th that the US and the UK have reached a new trade agreement, partially retracting tariffs in specific sectors and broadening market access for products from both nations. However, numerous details of the agreement are still under negotiation, and the 10% "reciprocal tariffs" previously imposed by the U.S. have not been eliminated.

Trump stated to the media at the White House that the final details of the agreement would be determined in the coming weeks. According to a White House document, the first 100,000 vehicles exported annually from the UK to the US will be subject to an additional 10% tariff, with any excess subject to a 25% tariff. The UK will reduce or eliminate non-tariff barriers, expanding market access for U.S. products such as beef, ethanol, grains, and certain industrial goods.

The UK government announced on its official website that the UK and the US would mutually reduce tariffs. Tariffs on UK exports of steel and aluminum to the US will be eliminated. Tariffs on automobiles imported from the US will be reduced from the current 27.5% to 10%. Furthermore, zero tariffs will be applied to UK agricultural exports to the US within certain quotas. The UK will also reduce tariffs on ethanol imports from the US to zero. In addition, the White House emphasized that the 10% "reciprocal tariffs" previously imposed by the US on its trading partners would remain in place. Trump stated to the media that the 10% tariff rate for the UK was not a template for other countries, and it could be the lowest rate, with other countries potentially facing higher tariffs.

Trump seeks to raise taxes on wealthy people earning US$2.5 million or more a year

U.S. President Trump is advocating for a tax increase on a segment of the wealthiest Americans to offset other tax cuts within his proposed economic plan. According to sources familiar with the matter, Trump's proposal includes a new 39.6% tax bracket for individuals earning at least US$2.5 million annually, or couples with a combined income of US$5 million. The current top individual tax rate is 37%.

According to a source, Trump presented this demand during a Wednesday phone call with House Speaker Mike Johnson, reiterating his desire to eliminate the carried interest tax break enjoyed by venture capital and private equity fund managers. Trump's signals on the issue of raising taxes on the wealthy have been mixed. He has previously stated that such taxes could prompt wealthy individuals to relocate and potentially disadvantage the Republican Party in elections. However, this proposal arises as lawmakers seek to finance what Trump calls a "big and beautiful bill," a multi-trillion dollar package that plans to extend the tax cuts from Trump's first term.

U.S. consumers' medium-term inflation expectations rise to a nearly three-year high

According to the New York Federal Reserve's monthly survey, U.S. consumers' medium-term inflation expectations surged to a nearly three-year high in April, while their views on the labor market deteriorated. The survey indicated that the median expectation for inflation over the next three years rose to 3.2% in April, the highest level since July 2022. However, expectations for inflation over the next year remained stable, and long-term inflation expectations slightly decreased to 2.7%. Federal Reserve officials are closely monitoring U.S. consumers' expectations of future price pressures to assess whether changes in U.S. presidential policies, particularly adjustments to trade policies, will trigger sustained inflation. The scope and duration of tariffs remain uncertain, potentially increasing consumer uncertainty about future inflation. The Federal Reserve announced on Wednesday that it would hold interest rates steady, noting that the economy remains robust but that uncertainty in the outlook has increased. Recent surveys show a sharp deterioration in household confidence.

Despite the Bank of England's rate cut, underlying challenges are evident

On May 8, the Bank of England (BOE) reduced its base rate by 25 basis points, lowering it from 4.5% to 4.25%. Interestingly, market consensus had anticipated an 8:1 vote, with one Monetary Policy Committee (MPC) member favoring a 50-basis-point cut and the remaining eight supporting a 25-basis-point reduction. However, the actual outcome revealed that two of the nine MPC members voted for a 50-basis-point cut, two favored holding rates steady, and only five supported the 25-basis-point reduction.

This divergence underscores the BOE's current predicament, balancing concerns over rising inflation with the potential for downside risks to the UK economy stemming from global developments.

In an interview following the Monetary Policy Committee's decision to cut the base rate by 25 basis points, a move that saw internal divisions and a more hawkish-than-anticipated vote, Governor Andrew Bailey addressed the market's near-certainty of no further rate cuts in June. When questioned on this, Bailey stated, "I think the only thing we can be certain of is that there's going to be a lot happening in the next six weeks or so in the world in which we are." He added, "So I have to be frank with you. You know, I'm very open-minded on every meeting, and it's dynamic for us. That's the philosophy. It's not changing, it's a permanent philosophy. So, frankly, I'm very open-minded about that." Bailey indicated that more information on both international and domestic developments, including wage settlements that continue to exert upward pressure on underlying inflation, would be available by the June meeting.

Three major U.S. automakers are dissatisfied with lower tariffs on U.K. imports

The American Automotive Policy Council, representing General Motors, Ford, and Stellantis, has voiced criticism of the trade agreement between the Trump administration and the UK, citing potential adverse effects on the US automotive industry. According to the terms of the trade agreement, the UK automotive sector is permitted to export 100,000 vehicles to the US at a 10% tariff rate. This quota aligns with the volume of vehicles the UK imported from the US in the preceding year. The industry group has highlighted that this arrangement effectively imposes a 10% tariff on vehicle imports from the UK, contrasting with the 25% tariffs applied to imports from Canada and Mexico, despite the latter's reliance on US-sourced components. Labor unions have expressed concerns that this agreement could set a precedent, potentially allowing other nations to adopt similar import standards, thereby disadvantaging the three major automakers' vehicle imports from Mexico or Canada.

Trump calls for a 30-day unconditional ceasefire in the Russia-Ukraine conflict, signaling the potential for additional sanctions

On Thursday, U.S. President Trump advocated for a 30-day unconditional ceasefire between Russia and Ukraine, cautioning that the US and its allies would impose additional sanctions if the ceasefire terms were not honored. Ukraine has signaled its willingness to accept the US proposal for an immediate 30-day ceasefire, whereas Russia has only proposed a three-day ceasefire, coinciding with the 80th-anniversary commemorations of the end of World War II on Thursday. Trump stated on social media, "If the (30-day) ceasefire is not observed, the US and its partners will implement further sanctions." Trump has expressed his desire to end the war in Ukraine, but his administration has also indicated that it would abandon efforts to broker an agreement if Russia and Ukraine fail to make progress.

Modi speaks out after India-Pakistan conflict escalates

According to reports from Indian media outlets, following the recent escalation of military tensions with Pakistan, Indian Prime Minister Modi convened a meeting of government ministers on the 8th, local time. He characterized the situation as a "sensitive period," urging all departments to "maintain constant vigilance" and "ensure clear communication." Modi reiterated the Indian government's commitment to safeguarding national security, operational readiness, and the safety of its citizens. The escalation follows a shooting incident on April 22 in the Indian-administered Kashmir region, targeting tourists and resulting in significant casualties. India has attributed the incident to Pakistan. Both nations have since adopted assertive measures, contributing to the heightened tensions. On the 7th, Pakistani officials reported that India launched airstrikes against targets within Pakistan and Pakistan-administered Kashmir earlier that day. The Indian Ministry of Defence subsequently issued a statement confirming that the Indian armed forces had targeted "terrorist infrastructure" at nine locations.

[Today's Focus]

UTC+8 16:40 BOE Governor Bailey Speaks

UTC+8 18:15 New York Fed President Williams Delivers Keynote Remarks

UTC+8 22:00 Fed Governor Kugler Speaks

UTC+8 22:00 Chicago Fed President Goolsbee Speaks

UTC+8 22:40 Fed Governor Barr Speaks

UTC+8 23:30 New York Fed President Williams and Fed Governor Waller Speak

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Gerik

Cryptocurrency

A Symbolic Comeback for Bitcoin

Bitcoin’s price jumped 4.7% on Thursday, trading at $101,329.97 by midday in New York, its highest level since early February. The climb reflects renewed confidence among investors as a key trade agreement between the United States and United Kingdom suggests a softening of global economic tensions ignited by U.S. President Donald Trump’s aggressive tariff policies.

The rebound is significant, marking bitcoin’s return to positive territory for the year after months of selling pressure that saw prices drop to around $74,000 in April. Though still below its January peak of over $109,000, the momentum indicates a potential rally may be underway.

Trade Deal Restores Confidence in Risk Assets

The catalyst for the rebound was the announcement of a trade agreement between Trump and British Prime Minister Keir Starmer. While the U.S. maintained a 10% tariff on U.K. imports, Britain agreed to cut its own tariffs from 5.1% to 1.8% and expand market access for U.S. goods. This “breakthrough” deal, the first since Trump reignited trade wars, was viewed by markets as a symbolic easing of protectionism that has rattled global supply chains for months.

According to Antoni Trenchev, co-founder of crypto platform Nexo, the sharp recovery in bitcoin underscores the rewards of “buying peak fear.” He emphasized that the surge past $100,000 was largely fueled by long-term holders absorbing short-term sell-offs, which is often interpreted as a bullish sign of underlying confidence.

Institutional Inflows, Geopolitics, and Stimulus Fueling the Rally

Joel Kruger of LMAX Group highlighted a confluence of factors behind bitcoin’s rally: strong institutional inflows into bitcoin ETFs, de-escalating geopolitical risks, and China’s expanded monetary stimulus. These factors have supported a rebound in risk appetite more broadly, with cryptocurrencies benefiting alongside tech stocks and emerging market assets.

While bitcoin’s recovery has been notable, the broader crypto space remains under strain. Ether, for instance, rose more than 14% to $2,050.46 but remains 50% below its highs from late 2024. Other altcoins have also struggled to keep pace, reinforcing bitcoin’s dominance in this current cycle.

A Glimpse Ahead: Resistance and Momentum

Analysts now see the $109,000 record as a near-term target if bullish sentiment continues. The fact that long-term holders—defined as those holding for more than 155 days—are increasing their positions reinforces the likelihood of a sustained uptrend. However, the market still faces macro headwinds, especially if Trump’s policy trajectory remains unpredictable or global financial conditions tighten.

The next few weeks will be critical in determining whether bitcoin can extend its gains or whether this breakout is merely a temporary relief rally fueled by a headline-driven bounce in risk sentiment.

Source: Reuters

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Economic

Commodity

Optimism Reignites as U.S. and China Resume Trade Talks

Oil prices climbed sharply after the U.S. Treasury confirmed that Secretary Scott Bessent will meet with China’s top economic officials in Switzerland on May 10 to discuss trade and tariff tensions. With the world’s two largest oil consumers back at the negotiation table, investor sentiment improved dramatically. Brent crude for June delivery rose $1.72, or 2.8%, closing at $62.84 per barrel, while U.S. West Texas Intermediate (WTI) jumped $1.84, or 3.2%, to settle at $59.91.

According to Ole Hvalbye of SEB Bank, the surge is rooted in renewed diplomatic momentum. “Markets are pricing in the possibility of easing tensions and stabilization of trade flows,” he noted, though cautioning that any breakthrough remains speculative at this point.

Tariffs Overtake Geopolitical Conflict as Key Price Catalyst

Traditionally, oil prices react most strongly to supply-side shocks or geopolitical instability. However, the trade war launched under President Donald Trump has introduced a new layer of volatility driven by tariff policy. Jim Ritterbusch of Ritterbusch & Associates observed that “risks that once came from the Middle East or Russian supply issues are now replaced by tariff announcements that can sway markets in real time.”

The unpredictability of Trump’s tariff policy—most recently exemplified by his sweeping “Liberation Day” duties—has left both investors and producers struggling to anticipate market direction. Many analysts agree that oil's price stability now depends as much on trade diplomacy as it does on physical supply-demand fundamentals.

Other Trade Deals and Supply Trends Add Complexity

In a parallel development, the U.S. and U.K. announced a “breakthrough” trade agreement that, while retaining a 10% U.S. import duty on British goods, includes tariff reductions from the U.K. side and improved market access for U.S. exports. This agreement, though smaller in scope, is a positive signal for global trade relationships and could aid U.S. oil and gas exporters if broader trade conditions improve.

On the supply front, OPEC and its allies (OPEC+) have signaled an intention to increase output. However, a Reuters survey revealed that actual OPEC production fell slightly in April due to reduced flows from Venezuela—hampered by renewed U.S. sanctions—and minor reductions in Iraq and Libya. The result is a short-term tightening of global supply, which may have amplified the recent price bounce.

Citi Adjusts Outlook, Highlights Risks from Iran and Demand Recovery

Citi Research revised its three-month Brent crude forecast downward from $60 to $55 per barrel, citing risks of oversupply amid uneven demand recovery and ongoing policy uncertainty. However, the firm maintained its full-year average forecast at $60 per barrel. Analysts warned that if a new U.S.-Iran nuclear deal materializes, it could significantly boost global crude supply, pushing Brent as low as $50. Conversely, without a deal, tensions could keep prices above $70 per barrel.

Adding to the geopolitical complexity, the U.S. recently imposed sanctions on two Chinese refineries for purchasing Iranian crude, forcing them to reroute and relabel products—a reflection of how sanctions enforcement is tightening and complicating trade flows in Asia.

Asian Markets, Renewables, and Strategic Adjustments

Beyond fossil fuel markets, ripple effects are being felt in renewables. Danish energy giant Orsted announced it would scrap a major offshore wind farm project in the UK, citing unfavorable regulatory and financial conditions. The cancellation underscores the broader uncertainty across the energy landscape, with traditional and renewable players both responding to global headwinds.

Meanwhile, Asian currencies have surged amid speculation of regional monetary cooperation, contributing to U.S. dollar weakness and offering additional support to oil prices in local currency terms. These FX dynamics, combined with the demand-side optimism from potential trade deals, are creating a fragile but positive short-term outlook.

Markets Buoyed, but Uncertainty Persists

While the current rally in crude prices reflects growing hope that diplomacy can ease trade tensions and re-anchor global growth, structural risks remain. Tariff policies continue to evolve unpredictably, OPEC production plans are inconsistent, and renewed geopolitical risks from Iran or Venezuela could shift the balance again.

The market’s direction now hinges on whether the upcoming U.S.-China talks in Switzerland produce tangible de-escalation. If not, today’s optimism could quickly turn to disappointment, bringing with it renewed price volatility.

Source: Reuters

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Patricia Franklin

Economic

President Donald Trump is pushing lawmakers to increase tax rates on some of the wealthiest Americans as a way to offset other cuts in his signature economic package.

The president’s proposal calls for creating a new 39.6% tax bracket for individuals earning at least $2.5 million, or couples making $5 million, according to people familiar with the discussion.

The president made the request in a Wednesday phone call to House Speaker Mike Johnson. He also reiterated his desire to eliminate the carried interest tax break claimed by venture capital and private equity fund managers, one person said.

Representative Jason Smith, the chairman of the House tax committee, is expected to meet with Trump on Friday and tell him the tax bill will deliver on the president’s priorities, a congressional aide said.

It remains unclear if the proposal would be accompanied by an expansion of the existing exemption for some small business income paid through the individual code.

If Congress approves Trump’s plan for a 39.6% rate, that would bring the top bracket to a level not seen since before Trump’s 2017 tax cut. The current top rate for individuals is 37%.

Trump has sent mixed signals on raising taxes on the wealthy. He has mused that such a levy could spur rich Americans to relocate to other countries and that it could harm Republicans at the ballot box.

But the proposal comes as lawmakers are struggling to find a way to pay for a multi-trillion-dollar package that Trump has dubbed the “one big beautiful bill” to extend his first-term tax cuts.

Republicans are under increasing pressure to limit the cost of the overall bill because they are struggling to find agreement on cuts to entitlement programs, including Medicaid health coverage for low-income Americans.

Increasing taxes on top-earners gives Republicans more wiggle room to make Trump’s 2017 tax cuts for households permanent and enact some of his campaign pledges, including eliminating levies on tips and overtime pay.

Creating a new tax rate on millionaires would raise $67.3 billion over ten years, according to a preliminary estimate provided to Bloomberg News by the non-partisan Tax Foundation. The group has previously projected that eliminating tax preferences for carried interest would raise $6.7 billion over a decade.

Raising taxes goes against long-standing Republican orthodoxy. Trump’s willingness to propose a tax hike for millionaires demonstrates how much he has remade the GOP in his own populist image.

Commerce Secretary Howard Lutnick told Bloomberg Television that higher taxes on the wealthy is a “smart” move to free up more money to pay for Trump’s campaign proposals to cut taxes for hospitality workers and seniors.

However, top Republicans have balked at other proposals that would raise levies on affluent households.

Representative Kevin Hern, an Oklahoma Republican on the House tax committee, said increasing the top rate and eliminating carried interest are under discussion but there is no agreement yet.

“Anytime the president asks for something, we will consider it,” he said.

Senator Mike Crapo, who leads the Senate Finance Committee, told conservative radio host Hugh Hewitt on Thursday that he’s “not excited” about the proposal to raise taxes, but there are a “number of people in both the House and the Senate who are.”

“If the president weighs in in favor of it, then that’s going to be a big factor that we have to take into consideration,” Crapo said.