Gary Cohn warns trade war could wipe out gains from tax cuts

President Donald Trump's former top economic adviser said trade disputes could undermine the benefits of tax cuts enacted last year and cause the U.S. economy to sputter.

Companies are reluctant to invest in their businesses until they have a better idea of how negotiations with Canada, China, Mexico, the European Union and other U.S. trade partners pan out, said Gary Cohn, who was director of the National Economic Council before leaving that post earlier this year, on Thursday at an event sponsored by the Washington Post.

Cohn delivered his warning as the Trump administration was expected to issue on Friday a final list of Chinese goods due to face steep new tariffs. With China and even longstanding economic allies vowing to retaliate, a trade war would hurt Americans he said.

"If you end up with a tariff battle, you will end up with price inflation, and you could end up with consumer debt," Cohn, formerly the president of Goldman Sachs, told the gathering. "Those are all historic ingredients for an economic slowdown."

Before stepping down as head of the NEC, Cohn had been a vocal opponent of the U.S. moving to impose tariffs on steel and aluminum imports.   

Asked if trade fights could erase gains from last year's cut in corporate and individuals taxes, Cohn replied, "Yes, it could."

Recent studies suggest the Trump administration's protectionist policies would kill more jobs than they create

Since Cohn left the White House, the Trump administration has imposed steel and aluminum tariffs on allies including Canada, the European Union and Mexico, all of which have promised retaliatory tariffs on U.S. imports.

Cohn also said there is no evidence of increased corporate spending that proponents of the tax cuts predicted, but added he is still hopeful companies would boost hiring and investment later this year.