WASHINGTON -- Corporate America, and even Republican leaders, have warned President Donald Trump that his trade war could end up erasing some of the savings reaped from the sharp cut in the corporate tax rate.
Now there's some evidence of just how much damage could be inflicted.
The hit in 2018 from the steel and aluminum tariffs enacted in March is larger than the first quarter tax savings for General Motors, Ford Motor Co. and Fiat Chrysler Automobiles, according to data compiled by Bloomberg and estimates provided by Nomura analyst Anindya Das. Assuming approximately the same tax savings from a lower corporate rate each quarter, the steel and aluminum tariffs could eat up anywhere from about a third to well more than half of the tax benefits in 2018, the Bloomberg analysis shows.
"The steel and aluminum tariffs hurt," said Ed Cohen, Honda Motor Co.'s vice president for government and industry affairs. "The tax bill was intended to spur economic activity and this will have the opposite economic effect."
For example, Ford saved about $208.4 million in taxes in the first quarter under a 21 percent corporate rate applied to its profit, compared to if the old rate of 35 percent had been applied to the same profit. The steel and aluminum tariffs will cost the automaker about $509 million in 2018, according to Nomura estimates.
General Motors costs for the year could total $493 million after it saved almost $339 million in the first quarter. And Fiat Chrysler will see almost $100 million more in tariff costs for the year compared to its savings in the first quarter.
These figures estimate how the reduction in the corporate tax rate to 21 percent from 35 percent is affecting companies' balance sheets based on first quarter profits. The calculations don't take into account other factors, such as depreciation, foreign tax credits or other one-time tax charges or benefits that can alter a business's overall tax rate.