Trump’s flagship economic bill hides a provision that could devastate North Carolina’s tobacco sector, stripping exporters of a key tax refund and risking thousands of jobs.
At a Glance
- Trump’s economic bill would end tobacco’s duty drawback eligibility
- North Carolina’s tobacco industry could lose up to $100 million annually
- Over 7,000 jobs and $1 billion in exports rely on the program
- Critics label the provision a “hidden tax” with far-reaching effects
- The Senate may amend the bill amid mounting regional pushback
The Hidden Clause That’s Raising Alarms
Dubbed the “One Big Beautiful Bill,” President Trump’s sweeping tax reform package passed the House with the promise of reviving American growth. But buried in Section 112032 of the legislation is a quiet clause targeting tobacco exports. By excluding tobacco from the federal duty drawback program—a refund mechanism for taxes on exported goods—the bill introduces what critics say is a covert tax that punishes a major Southern industry.
The duty drawback program, which has existed in various forms since the founding era, is designed to eliminate double taxation on exports. Under the new bill, however, tobacco would become the only U.S. export explicitly denied this benefit.
Watch a report: How Trump’s tax plan could upend the U.S. tobacco industry.
What It Means for North Carolina
North Carolina, the backbone of the U.S. tobacco trade, stands to lose the most. The state’s industry directly contributes over $30 billion to its economy and supports nearly 200,000 jobs. More than 800 farms grow tobacco, and duty drawback benefits alone support 7,470 jobs and $1 billion in export activity.
Removing these refunds would not only cut deeply into revenue but hurt small farmers and exporters disproportionately. Many operate on thin margins and depend on international markets to stay afloat. Without the drawback, industry insiders warn of job losses, reduced competitiveness, and further consolidation in an already shrinking sector.
Donald Bryson of the John Locke Foundation calls the provision an attack on tax neutrality, noting, “When Congress taxes a product that can never reach American consumers, it violates a basic principle of sound tax policy.”
Political Fallout and Path Ahead
President Trump has indicated openness to Senate-led revisions to the bill, stating that some changes may be “fairly significant.” Senate Majority Leader John Thune echoed this sentiment, signaling that GOP lawmakers are weighing amendments to protect regional economic interests.
Industry groups like Tobacco Associates, Inc. and the North Carolina Chamber are now lobbying for the restoration of drawback eligibility. Their argument is not about domestic consumption but economic fairness: if a product never touches American soil, it shouldn’t be taxed like it does.
Whether the Senate heeds this warning will determine the fate of thousands of North Carolinians and set a precedent for how Congress balances national legislation with regional livelihoods.
