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Counting the Casualties: What is the price to be paid if tariffs go to the max promised?

Jun 05, 2019

Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions
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  • A Bloomberg report today highlights the worst case scenario for the trade war, asking what happens if the trade talks fail
  • They look at a scenario in which tariffs on Mexico rise to 25% and those on China are place on the remaining ~$300 billion in imports that don’t presently have tariffs


They plug this into their global macro model and come up with the following casualties:

  • US GDP would lose 0.8% in 2020 and 1.0% in 2021 in a scenario of maximum tariffs
  • The report notes the hit to confidence in this scenario would be large and could cause that GDP loss to come sooner that the model predicts
  • The Chinese economy takes a 0.7% hit in 2020 and 0.9% in 2021
  • The global economy would take a 0.6% hit in 2020 and 0.8% hit in 2021, a shot equal to $800 billion in global GDP
  • Amid this weakness global equities fall 10%, it is assumed

 

The Bloomberg team also models a short-term scenario in which the situation with Mexico is resolved by the end of the year and tariffs are in place for a short period of time

  • Mexico loses 0.6% of GDP in 2019 and 0.9% in 2020
  • The US loses 0.1% GDP in 2019 and 0.1% in 2020
  • Mexico’s Foreign Minister is meeting with US officials today and said ahead of the meeting he sees an 80% tariffs are avoided

 

Other trade war blog posts:
 

click to read

It was you! China publishes white paper, pointing finger at US for causing trade tension

You have your blacklist, we'll make ours! China creating list of "unreliable entities" from the US, saying "Necessary means will be taken" 

Don't Say I Didn't Warn You: Chinese State Media Threatens US with a Big Rare Earth Metals Stick

Tariffs for you too! Trump threatens tariffs on Mexico over illegal immigration, US trade rep not a happy camper 

 

 

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