WASHINGTON — President Trump’s tax cuts provided a temporary jolt to the United States economy by putting more money into taxpayers’ pockets. The tariffs that Mr. Trump has grown so fond of may have the opposite effect.
Two new analyses show that the tariffs Mr. Trump is using to punish China, Mexico, Europe and other governments would more than wipe out any gains from his $1.5 trillion tax cut for low- and middle-income earners, leaving them with less money to spend into a consumer-driven economy. Higher earners would fare only slightly better, with their tax gains significantly eroded but not entirely washed away.
The potential for Mr. Trump’s tariffs to nullify his signature tax cut shows how the president’s trade war could undermine his biggest selling point going into his 2020 re-election campaign: a strong economy.
Investors, bond markets and Wall Street analysts appear increasingly alarmed by the potential slowdown in growth that could result from Mr. Trump’s trade escalations, including his plan to impose tariffs of up to 25 percent on Mexican goods and to tax everything that China imports into the United States. He is also mulling tariffs on imported automobiles from Europe and Japan.
Yields on Treasury bonds are tumbling, as investors seek safe harbor against growing fears of an economic downturn. A closely watched survey of manufacturing activity declined at a faster rate than forecasters expected on Monday, with several business owners citing rising concerns over the cost and uncertainty brought on by tariffs.
[To read original article, click here]