President Donald Trump’s tariffs could cancel out the economic benefits of the GOP’s tax cuts, according to a new analysis from the Tax Foundation.
“Our analysis finds the current U.S.-imposed and scheduled tariffs threaten to offset much of the economic benefits of the tax cuts, while falling short of paying for them,” according to a report from the national nonprofit.
The tax cuts included in the One Big Beautiful Bill Act are expected to cost about $4 trillion over the next decade, or about $3 trillion factoring in economic growth. At the same time, Trump’s tariffs are expected to drag on the U.S. economy.
“Altogether, the tariffs would offset a little more than half the cost of the OBBBA on a dynamic basis and would reduce the long-run economic growth effects to 0.4%,” according to the Tax Foundation analysis.
U.S. taxpayers at the lower-end of the income spectrum would get hit the hardest by the combination of the tariffs and the GOP tax cuts and spending plan.
“The tariffs offset a larger portion of the tax cuts for lower- and middle-income taxpayers than for higher-income taxpayers, and by the end of the budget window, many low-income taxpayers would be worse off under the combination,” according to the analysis.
Much about Trump’s overall end-game for tariffs remain uncertain. The president has repeatedly whipsawed financial markets with his on-again, off-again plans and changing tariff rates. The Tax Foundation analysis assumes the tariffs in place as of Thursday will remain in place.
The tariffs could bring in trillions in revenue over the next decade, but not enough to cover the cost of the OBBBA.
“Before accounting for retaliation, the tariffs imposed and threatened would reduce long-run GDP by 0.8%, raising about $1.7 trillion in revenue from 2025 through 2034 measured on a dynamic basis, accounting for slower economic growth,” according to the Tax Foundation analysis.
A tariff is a tax on imported goods paid to the federal government by the importer. That cost is often passed on to consumers in the form of higher prices.
