US: What if tariffs on all China imports were 25%? – Standard Chartered

Sonia Meskin, US economist at Standard Chartered, suggests that if all US imports from China (USD 535bn) were subjected to 25% tariffs, then they estimate no more than a 0.02-0.4% impact on the US GDP and 0.05-0.20% on core CPI y/y.

Key Quotes

“Even though tariffs constitute a one-off supply shock and likely entail deadweight loss to the economy, we believe the effects of a broad 25% tariff are likely to be relatively small for the US, unless there is a sustained negative impact on business and consumer confidence.”

“The sum of exports and imports with China (USD 685bn) is just over 3% of nominal US GDP. If 25% tariffs were imposed on all of China’s exports and imports, the amount would still be less than 1% of US GDP against the backdrop of solid economic growth, stable inflation and a robust labour market. But even this loss would be an extreme and unlikely scenario.”

“In practice, the substitution effect, some Chinese yuan (CNY) devaluation and some pass through of the cost to China’s producers are likely. We estimate no more than a 0.02-0.4% impact on US GDP and 0.05%-0.20% on core CPI y/y. The impact could be higher should business and consumer confidence be adversely affected and depress real activity.”