The recent tax cuts may have taken some American consumers one step forward financially, but Chinese tariffs — and now Mexican tariffs — could take them two steps back.
New estimates from the Tax Foundation, a right-leaning think tank, say that while the Trump administration’s 2017 tax cuts created about 380,000 full-time equivalent jobs, adding tariffs on Mexican products to the existing tariffs on Chinese goods could eliminate almost 610,000 full-time equivalent jobs from the U.S. workforce.
By itself, a 5% tariff on Mexican goods could drain off approximately 39,000 full time equivalent jobs, the Tax Foundation said in an analysis on the heels of the Mexican tariff news.
President Donald Trump announced plans Thursday for escalating tariffs against Mexico if the country cannot halt illegal immigration. Trump said the first round of tariffs on America’s third-largest trading partner would take effect June 10, detailing his plans on Twitter TWTR, -4.84% . The tariffs could ratchet up to 25% by October, Trump added.
It’s the latest front in Trump’s trade disputes. The administration has already imposed a 25% tariff on $200 billion in Chinese imports. China is swinging back with retaliatory tariffs on $60 billion of American imports. Researchers and business groups say companies and consumers are the real victims.
Tax Foundation analysts have said the tariff fight with China alone could wipe out 580,000 full-time equivalent jobs.
The Chinese and Mexican tariffs could cancel out American taxpayers’ recent gains in other ways. Though the Tax Foundation has projected taxpayers could reap $259 billion in tax savings under the new tax law, a 25% tariff on goods and services from both countries could equate to a $232 billion tax on those incoming items.
“This is just a continuation of a number of tariff increases from the administration, and those have consequences in terms of higher prices for consumers,” Nicole Kaeding, vice president of federal projects, said the Mexican tariffs. Price increases impact low and middle-income households more than high-income ones, she noted.
Evidence of real-life effects of the Mexican tariffs are quickly bubbling up. On Monday, Chipotle CMG, -2.28% — the Mexican fast-food giant that uses Mexican avocados for its freshly-made guacamole — said it might have to charge another 5 cents per burrito.
The “modest price increase” would “cover the increased cost without impacting our strong value proposition,” said Jack Hartung, Chipotle’s chief financial officer.
America imported $346.5 billion in products from Mexico last year, according to the U.S. Trade Representative. About 90% of avocados in America come from Mexico and one of the peak buying times is around July Fourth, according one calculation.
Estimates on the potential consequences of Mexican tariffs are still surfacing, but details on how Chinese tariffs are affecting consumers are becoming more clear. Late last month, researchers at the Federal Reserve Bank of New York said a 25% tariff on Chinese imports would add on an extra $831 in annual costs for the average American household.
The $831 figure is just about double the Fed’s earlier estimate of the initial Chinese tariffs that took effect last year. At the time, researchers said the 2018 tariffs would cost households an extra $419 per year.