Trump tariffs threaten to drop gains from tax cuts

President Trump Donald John TrumpPapadopoulos on AG's new powers: 'Trump is now on the offense' Pelosi uses Trump to her advantage Mike Pence delivers West Point commencement address MORE 's escalating trade war with China to wash away the positive economic effects from his signature tax cuts, which could endanger his reelection prospects.

Trump has regularly pointed to the booming economy as a central reason he believes he will be reelected and credits the tax cuts with boosting output and bringing down unemployment.

But economists say that his latest tariffs are all but canceling out the effects of the tax cuts for all the wealthiest American families. An additional round of tariffs Trump has threatened to collapse with a trade deal with China could tip the scales altogether

"It's a very risky strategy," says Nicole Kaeding, vice president of Federal Projects at the Tax Foundation, a right -leaning think tank.

“The tax cuts and jobs act is pro-growth. It should increase the size of the U.S. economy in the long run and is expected to create jobs. The tariffs, however, move in the opposite direction, ”continued.

In mid-May, Trump increased tariffs on $ 200 billion in Chinese imports from 1[ads1]0 percent to 25 percent.

A study on the New York Federal Reserve's blog suggested those tariffs alone had the potential to wipe the benefits of the tax-cut law for most families.

The study by three economists found the tariffs would lead to higher prices that could cost US households in average of $ 831 a year.

The non-partisan tax policy center found that the trump tax law would save families earning between $ 50,000 and $ 75,000 per year $ 870, meaning the higher China tariffs would come close to wiping out gains for these households

The Tax Policy Center study found that at US Household earning between $ 75,000 and $ 100,000 would save $ 1,310, while households with annual income between $ 100,000 to $ 200,000 would save $ 2,260.

Trump, however, is talking about going further with his tariffs. impose tariffs on another $ 300 billion of Chinese imports if progress is not made in negotiations.

The president also has the right to impose tariffs on car imports on several close trade partners in six months.

And Trump has separately imposed tariffs of 25 percent on $ 50 billion in Chinese imports, plus additional tariffs on steel, aluminum, solar panels and washing machines.

Those tariffs would all take a bite out of households as consumers face higher prices for goods.

Economists also point out the tariffs are regressive and will hurt lower-income households disproportionately.

In terms of the broader economy, there have been fears that the trade war cou ld lead to a recession

A Morgan Stanley analysis last week warned that if Trump went forward with tariffs on $ 300 billion in Chinese imports, "we see the global economy heading towards recession."

Other reports suggest The trade was not completely eliminated the economic benefits of the tax cuts, which the Republicans credit with boosting wages and lowering unemployment.

A Tax Foundation analysis found that the tax cuts would boost the size of the economy by 1.7 percent in the long-run, while the trade was cut down the economy by 0.74 percent, eating up around 44 percent of the economic benefits.

Yet the Tax Foundation also estimated the tariffs could cost the economy 570,000 jobs, significantly more than the 340,000 the tax cuts created.

There were winners and losers in the tax-cut law and there will be winners and losers in the trade war.

"It's clearly done damage to some parts of the economy, but the people hit hardest the farmers, who are affected by the retaliatory tariffs, ”noted David Wessel, Director of the Brookings Institution of Hutchins Center on Fiscal and Monetary Policy.

Trump won election in part by running against the trade policies of democratic and republican administrations, arguing it would stand up for us businesses. Trade was a factor in the swing states of Pennsylvania, Michigan and Wisconsin, three states no Republican before Trump had won a presidential election in decades.

How the economy fares between now and November 2020 will surely play a role Trump's fortunes, and trade and taxes are only two contributing to economic factors.

"Could the tariffs and uncertainty about them hurt the economy? Yes. But there is a lot of other things going right, and trade is still a small part of the economy relative to other things,

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