Senate Majority Leader Mitch McConnellurged the administration this week to delay imposing the tariffsuntil Republicans in Congress could plead their case to Trump. MostSenate Republicans have objected to Trump's use of tariffs. (Photo:Fotolia)

(Bloomberg) –President Donald Trump's trade wars have alreadywiped out all but $100 of the average American household's windfallfrom Trump's 2017 tax law. And that's just thebeginning.

That last $100 in tax-cut gains could soon completely disappear —and then some — because of additional tariffs Trump hasannounced.

If the president makes good on his threats to impose levies onvirtually all imports from China and Mexico, those middle-earninghouseholds could pay nearly $4,000 more.

Subtract the tax cut, and the average household willeffectively be paying about $3,000 more in taxes through additionallevies on the products they consume.

“It's giving with one hand and taking with the other,” said KimClausing, an economics professor at Reed College in Portland,Oregon, who has written a book promoting free trade.

Here's how the math works. Middle earners got an average tax cutof $930, according to the Urban-Brookings TaxPolicy Center. The tariffs already in effect cost the averagehousehold about $831, according to research fromthe New York Federal Reserve.

China goods

Add in the additional tariffs on another $300 billion in Chinesegoods that Trump proposed in May and that increases the cost forthe average family of four to about $2,294 annually, according toresearch from Tariffs Hurt the Heartland, a coalition of businessgroups that oppose tariffs.

Trump has also threatened to levy tariffs on all imports fromMexico, starting with a 5% tax beginning as soon as Monday thatwould increase monthly to 25% by October. If the tariffs reachtheir highest level, that would increase costs for households by$1,700 annually, according to Gary Hufbauer, a senior fellow at thecentrist Peterson Institute for International Economics.

The full force of the Chinese and Mexican tariffs and subsequentretaliation would mean that consumers are paying an additional$3,994 because of tariffs, more than four times the $930 tax cutfor middle earners that the Republican Party touts as its signaturelegislative achievement.

The tariffs are “clearly demolishing” the benefits of the taxcuts for both businesses and consumers, said Daniel Ikenson, whodirects trade policy at the libertarian Cato Institute. “Manyhouseholds and consumers have been spared so far, but the nextround of tariffs will be more problematic.”

In the beginning of the trade dispute, Trump and his adviserssought to put tariffs on imports that consumers don't directly buy,such as steel and aluminum. But as the trade feud with China hasescalated, they ran out of non-consumer goods on which to putlevies. The most recent round of announced tariffs includesconsumer products, such as apparel, sporting goods and kitchenware.

Trump's most recent threat on all imports from Mexico wouldincrease prices on cars and auto parts, televisions, phones and airconditioners, as well as produce, such as avocados, citrus andpineapples.

Only the top 5% of earners would continue to see a net tax cutof more than 1%, according to the right-leaning Tax Foundation.

Tariffs would also depress wages by about 0.5% and result in theloss of nearly 610,000 full-time jobs, according to thefoundation.

That creates political problems for Republicans in Congress whohave continued to back Trump even as they disagreed with his tradepolicies.

Republicans have cited the passage of the tax-cut law, lowunemployment rates and wage increases as signs that Trump'spolicies have buoyed the economy. But there are signs that supportis beginning to fracture.

The tax cuts “vaulted America back into the most competitiveeconomy,” said Representative Kevin Brady, a Texas Republican wholed the passage of the tax cut legislation in the House. “Highertariffs and the uncertainty that comes with trade disputes” hurtthe economy, he said.

Senate Majority Leader MitchMcConnell urged the administration this week todelay imposing the tariffs until Republicans in Congress couldplead their case to Trump. Most Senate Republicans have objected toTrump's use of tariffs to force tougher border enforcement byMexico. Lawmakers are weighing moves to block the levies.

“This is a man-made disaster, because Donald Trump is notfocused in any way on advancing a well-thought-out doctrine,” saidRepresentative Hakeem Jeffries, a top Democrat from New York. “Heseems to be carrying out at times personal vendettas, at othertimes political objectives and sometimes an effort to distract fromthe news of the day.”

Little noticed

The effects of tariffs have yet to become noticeable to averageconsumers. That could soon change. The tariffs on goods from Mexicoare slated to go into effect Monday, barring a last-minute dealbetween Mexican and U.S. negotiators. The Chinese tariffs hittingconsumer goods could go into effect in the coming months.

Negotiators met for a second day Thursday to try to come to someagreement that would avert the tariffs. Mexico pushed for moretime, but Vice President Mike Pence said the U.S. plans to imposetariffs on Monday.

“It's not like all of sudden prices will jump 25%, but theycould increase 10% or 11%,” said Brian Yarbrough, a senior equityanalyst at Edward Jones, said of tariffs of 25% or more. “At somepoint, price increases will choke off demand, resulting in fewersales.”

Republicans are hoping to campaign in 2020 on the message of astrong economy buoyed by their tax reductions and deregulation,which began two years ago.

But the fresh sting of tariffs risk erasing any economicgoodwill those policies generated.

“For the average household it will be a net loss, no doubt,” thePeterson Institutes's Hufbauer said. “It will be painful.”

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