President Trump Donald John TrumpPapadopoulos on the AG's new powers: "Trump is now in danger" Pelosi uses Trump to his advantage Mike Pence delivers West Point address MORE The escalating trade war with China threatens the positive economic impact of its signing tax cuts, which could jeopardize its chances of re-election.
Trump has routinely pointed to the booming economy as a key reason he believes he will be re-elected, and attributes an increase in output and unemployment to tax cuts.
Economists say, however, that its recent tariffs almost offset the effects of tax cuts on all but the richest American families. An additional bargaining round, which Trump threatened in the hope of reaching a trade agreement with China, could topple the balance.
"This is a very risky strategy," says Nicole Kaeding, vice president of Federal Projects at the Tax Foundation, a law think tank.
"The law on tax cuts and employment is growth-enhancing. It should increase the size of the US economy in the long run and create jobs. The tariffs, however, are moving in the opposite direction, "she continued.
In mid-May, Trump raised tariffs on Chinese imports of $ 200 billion from 1
A Study of the New York Federal Reserve These tariffs alone could undermine the benefits of the Tax Reduction Law for most families.
The study by three economists found that tariffs would lead to higher prices that could cost US households an average of $ 831 per year
The impartial Tax Policy Center noted that the Trump tax code families have an income between Saving $ 50,000 and $ 75,000 a year, which means that higher Chinese tariffs would almost destroy the profits for these households.
The Tax Policy Center study found that a US household earning between $ 75,000 and $ 100,000 saves $ 1,310 before tax, while households with annual incomes between $ 100,000 and $ 200,000 save $ 2,260 Save dollars.
Trump, however, says he has threatened to impose tariffs on another $ 300 billion in Chinese imports if no progress is made in the negotiations. The president has also reserved the right to raise tariffs on car imports for several close business partners in six months.
And Trump has separately imposed duties of 25 percent to $ 50 billion on Chinese imports and additional duties on steel, aluminum, solar panels and washing machines.
These tariffs would all take a bite out of household income as consumers are faced with higher prices for goods.
Economists also point out that tariffs are declining and will burden disproportionately low-income households.
In terms of the overall economy, there were fears that the trade war could lead to a recession.
Morgan Stanley's analysis last week warned that Trump, if he set tariffs of $ 300 billion on Chinese imports, "is driving the global economy toward a recession."  9659004] Other reports indicate that the trade wars would not wholly offset the economic benefits of tax cuts, which blamed Republicans for raising wages and reducing unemployment.
A tax foundation analysis found that tax cuts would increase the size of the economy by 1.7 percent in the long term, while the trade war would cut the economy by 0.74 percent and consume about 44 percent of its economic benefits. However, the Tax Foundation also estimated that tariffs could cost the economy 570,000 jobs, much more than the 340,000 created by the tax cuts.
There were winners and losers in the Tax Reduction Act and there will be winners and losers in the Trade War.
affected by the retaliatory tariffs, "said David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution.
And the political implications are even more difficult to predict.
Trump won the election in part by running against them the trade policy of the Democratic and Republican government, on the grounds that he would advocate for US companies. Trade was seen as a factor in the swing states of Pennsylvania, Michigan, and Wisconsin, three states where Trump had not won a Republican in a presidential election in decades. Trump's assets, trade, and taxes are just two economic factors.
"Could customs duties and uncertainty hurt the economy? Yes. But there are a lot of other things that are going well, and trading is still a small part of the economy compared to other things, "Wessel said.