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By Hugh Cameron
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Former Treasury Secretary Janet Yellen has warned that the President Donald Trump administration's successful push to spare U.S. corporations from new global tax rules will blunt the country's capacity to trim its deficits, while also potentially jeopardizing the agreement itself.
On Monday, the Organisation for Economic Cooperation (OECD), announced that it had finalized a plan on "global minimum tax arrangements" with 147 nations. However, the agreement exempts U.S. multinational corporations from its effects, including the proposed 15 percent global minimum tax, which Treasury Secretary Scott Bessent hailed as a "historic victory" for American sovereignty in the face of "extraterritorial overreach."
But speaking to Newsweek, Yellen, who spearheaded past iterations of the plan under Joe Biden and made global minimum tax a key priority during her tenure, said the exemption had sacrificed “significant tax revenue” for the U.S. government, and as a result will impair efforts to close the country’s “large fiscal deficit.”
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Why It Matters
The two-pillar agreement was aimed at discouraging tax avoidance by large corporations and curbing a "race to the bottom" in global corporate taxation, and was celebrated by OECD officials as setting the “foundation for stability and certainty in the international tax system.”
But the U.S. exemption has faced significant criticism from tax transparency groups and now the plan’s primary proponents, who believe this will undercut its overall effectiveness while enabling large American companies to continue doing business abroad while being taxed more favorably in other jurisdictions.
What To Know
Monday’s announcement from the OECD follows an earlier agreement in 2021, spearheaded by Biden and Yellen, onto which over 130 nations signed. This version aimed to tax large multinational corporations at a minimum rate of 15 percent and require them to pay taxes in the countries where they do business, thereby minimizing their ability to avoid tax by headquartering in low- or no-tax jurisdictions.
Yellen at the time celebrated this as a “once-in-a-generation accomplishment for economic diplomacy” which had essentially ended the “race to the bottom on corporate taxation.”
But the agreement was widely criticized by Republicans, and President Trump last January disavowed the country’s previous commitments to the deal, saying it "not only allows extraterritorial jurisdiction over American income but also limits our Nation’s ability to enact tax policies that serve the interests of American businesses and workers."
The Trump administration in June renegotiated these commitments by pushing congressional Republicans to remove a so-called "revenge tax" provision from the One Big Beautiful Bill Act, which would have allowed the federal government to impose retaliatory duties on non-U. S. businesses.
As a result, and threats by Trump to withdraw from the deal entirely, the new, amended version exempts U.S.-based multinationals from the 15 percent minimum global corporate tax, which Bessent described as "a historic victory in preserving U.S. sovereignty and protecting American workers and businesses from extraterritorial overreach."
“This was entirely predictable,” said Attiya Waris, a United Nations independent expert on foreign debt and professor of fiscal law at the University of Nairobi in Kenya*.* “The United States has long resisted binding multilateral tax rules. Within the OECD, outcomes reflect economic weight and trade power.
“As the largest source of economic activity, the U.S. holds disproportionate leverage," she told Newsweek. "The exemption reflects that imbalance rather than a commitment to global tax cooperation.”
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End 'Global Race to the Bottom'
“The Biden administration sought to cooperate with other countries to craft a multilateral agreement, with strong enforcement, that would end the global race to the bottom in corporate taxation,” Yellen told Newsweek. “We also wanted to level the competitive playing field so that multinational corporations based in different jurisdictions would compete based on their fundamental strengths rather than tax considerations.”
“However, the Trump administration eschewed global cooperation—a rules-based multilateral approach—in favor of a unilateral approach,” she added. “It prioritized protecting the tax sovereignty of the United States over the worldwide operations of U.S. companies to a cooperat[ive] multilateral approach.”
The White House did not respond directly to Yellen's criticisms when approached for comment, with Deputy Press Secretary Kush Desai instead telling Newsweek that the former Treasury Secretary “presided over historic deficit spending that fueled a generational inflation and affordability crisis."
"The Trump administration, on the other hand, has in one year cooled inflation, accelerated economic growth, slashed trade deficits, and secured trillions in investments to make and hire in America," he added.
While the U.S. trade deficit is currently less than half of what it was at the same point of Biden’s presidency, according to the Committee for a Responsible Federal Budget, Biden’s tenure saw $6.6 trillion of deficit-increasing actions and $1.9 trillion of deficit-reducing actions, compared to $8.8 trillion and $443 billion, respectively, in Trump’s first term. The annual rate of inflation currently stands at 2.7 percent down from 3.0 when Trump returned to office in January.
Tax transparency advocates have criticized the OECD’s “side-by-side” arrangement on global taxation, Alex Cobham of the Tax Justice Network said this forfeits foreign states’ right to “tax businesses operating within their own borders.”
“By the Tax Justice Network’s assessment, France for example is already losing $14 billion a year to tax cheating U.S. firms, Germany is losing $16 billion and the UK is losing $9 billion,” he wrote on Monday. “Today’s bending of the knee to Trump will cost countries billions more.”
“The rules are generally weaker under the side-by-side system; the U.S. negotiated exceptions will reduce the effectiveness of the agreement in stemming tax avoidance and tax competition,” economist Kimberly Clausing told Newsweek.
And Yellen believes the exemption could weaken the agreement’s overall effectiveness and prompt other nations to give up their commitments to global minimum taxation.
What People Are Saying
Former Treasury Secretary Janet Yellen told Newsweek: “U.S. headquartered multinational enterprises represent almost half of all global multinational profit. So exempting these firms from the global regime undermines its consistency and, over time, is likely to produce an unloved [sic] playing field that favors U.S. firms. This may eventually lead foreign sovereigns to abandon the global minimum tax.”
Attiya Waris, a U.N. independent expert on foreign debt, told Newsweek: “A global minimum tax is weaker without the world’s largest economy. Multilateral tax systems only work when major players participate in good faith. The U.S. has shown little appetite for this, including by stepping back from U.N.-led tax negotiations. That inevitably undermines both enforcement and credibility.”
**“**There is a clear risk that multinationals with aggressive tax strategies will respond by shifting profits or registrations to the United States,” she added. “The exemption rewards that behavior.”
Zorka Millin, policy director at the Financial Accountability and Corporate Transparency (FACT) Coalition, told Newsweek: “The U.S. got its way by tricking and bullying other countries through threatening retaliatory taxes, which never stood a chance in Congress anyway.”
“The upshot is that U.S. companies won't play by the same tax rules as their foreign competitors, but they are still subject to U.S. taxes on their foreign profits,” she added. “Notwithstanding the OECD arrangement, Congress must strengthen the relevant U.S. rules and close international tax loopholes that drain billions from the U.S. budget.”
What Happens Next
The OECD said it will release additional details on the implementation of the agreement in the coming weeks.
Bessent said that the Treasury Department would "continue engaging with foreign countries to ensure full implementation of the agreement, build greater international tax stability, and move toward a constructive dialogue on the taxation of the digital economy."
Update 01/08/2026 10:33 a.m. ET: This article was updated with comment from the White House.
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