Trump's Iran War Offsets Tax Cut Savings

Costs of conflict wipe out benefits of GOP's signature policy

Mar. 16, 2026 at 8:09pm

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According to tax policy analysts, the costs tied to President Trump's war with Iran have offset any savings Americans could have expected from his signature first-term tax cuts. With the closure of the Strait of Hormuz disrupting global trade and causing gas prices to spike, the economic stimulus from the tax cuts is now expected to be "relatively minor" at best.

Why it matters

The GOP was counting on the tax cuts and resulting economic growth to bolster their support in the upcoming midterm elections. However, the unexpected costs of the Iran conflict have undercut those political calculations, potentially dealing a blow to Republican electoral prospects.

The details

The war with Iran has led to the closure of the Strait of Hormuz, a critical global trade route, causing gas prices to surge by up to 65 cents per gallon - the fastest weekly increase in two decades. This energy shock is expected to eat into any potential stimulus from the tax cuts, with economists saying the boost was "relatively minor" even before the conflict.

  • The Strait of Hormuz was closed since the start of Trump's war with Iran.
  • Gas prices have spiked by up to 65 cents per gallon in recent weeks.

The players

Andrew Duehren

A New York Times tax policy analyst.

Michael Pugliese

A senior economist at Wells Fargo.

Heather Berger

An economist at Morgan Stanley.

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What they’re saying

“This energy shock is coming just as the refund money really gets flowing.”

— Michael Pugliese, Senior Economist, Wells Fargo

“If the oil shock is large and sustained, then yes, it can more than offset this boost from refunds.”

— Heather Berger, Economist, Morgan Stanley

The takeaway

The unexpected costs of President Trump's war with Iran have undercut the economic benefits of his signature first-term tax cuts, potentially dealing a blow to Republican electoral prospects as the party was counting on the tax cuts to boost their support in the upcoming midterm elections.