However, it’s important that he remember it is also much more a matter of optics today, as was exhibited with the Bush steel tariffs and the international backlash. The announced tariffs on China have prompted retaliation and other, smaller nations are also unlikely to back down as they must save face. The figures discussed above about the actual amount of damage or benefit done by tariffs become smaller and smaller as time goes on. Modern trade measures are much more pointed in their targets than the older, sweeping tariffs on all imports which had greater repercussions and as a result have far smaller effects on the economy as a whole. Even with the tariffs Trump has already enacted, they total roughly 0.05% of GDP. The proposed tariff on $200 billion of all Chinese goods would still only amount to 0.1% of GDP. As a result, although the totals sound lofty, the percentage of tariffs relative to GDP appears fairly tame.
Here are the actual numbers involved in the Trump administration’s tariffs:
Steel: 25% x $29.3bil = $7.3 billion in tariffs / $19,832 billion US GDP = 0.04% of GDP.
Aluminum, 10% x $17 bil = $1.7 billion additional tariffs / $19,832 billion US GDP = 0.01% of GDP.
Chinese goods: 10% on $200bil imports = $20.3 billion in tariffs / $19,832 billion US GDP = 0.10% of GDP.
Alex Varner is Director of Research at Main Management, a participant in the ETF Strategist Channel.
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