Multinational companies have been preparing for years for the impact of the 15% global minimum corporate tax initiative and the global tax reform framework. However, within hours of President Trump's inauguration on January 20, he signed an executive order directing the United States to withdraw from the "global tax deal," leaving companies and experts uncertain about how American multinationals will comply.

Trump's move is seen by some as the death knell for the global minimum tax, known as "Pillar Two." The initiative is led by the Organisation for Economic Co-operation and Development (OECD). At the same time, the executive order has raised questions about what exactly its broad wording targets.

The answer is not entirely clear. Grant Wardell-Johnson, global head of tax at KPMG, said it will take time to clarify the true state of the global tax system and where and how companies need to comply in the Trump era.

He expects the next official step to come in mid-March, when the Treasury Secretary and the U.S. Trade Representative are required to submit recommendations for protective measures against foreign tax rules that could harm American companies. "The big question is: 'What will the U.S. ask for?'" Wardell-Johnson said in an interview. Nevertheless, he still believes the global tax system could survive without U.S. support.

Although the executive order does not directly mention the global minimum tax, Wardell-Johnson asserts that in any U.S. negotiations over the global tax deal, the tax and the related Undertaxed Profits Rule (UTPR) appear to be the focus. According to the Tax Foundation, the UTPR allows a country to impose a "top-up" tax on a company if it is part of a large group that pays less than the proposed 15% global minimum tax in another jurisdiction.

A "critical mass" of countries has already introduced Pillar Two, including EU nations, the UK, Japan, South Korea, and Australia. Despite this, Wardell-Johnson says he sees a possible negotiation path: non-U.S. companies could agree not to tax profits within the U.S., but continue to tax profits of U.S. subsidiaries located in countries that have implemented the tax. Another possible negotiation point is extending existing safe harbor rules, which have already provided U.S. multinationals more transition time to adapt to the new tax system.

Amid the uncertainty over the global tax deal, Trump separately announced on Sunday (February 9) that he would impose a 25% tariff on all steel imported into the U.S., according to ABC News and other media reports.

Wardell-Johnson believes Trump's executive order appears to be an "opening shot" to begin tax negotiations, citing the president's similar tactics of threatening tariffs on Mexico and Canada previously.

"I think the January 20 executive order is designed to look tough but leaves options open for future measures," he said.