Trump's latest tariffs on Chinese imports -- 10% to year end and then 15% starting January 1 -- should exert only a slight drag on US GDP Growth. I estimate they will subtract about 0.2% pt from annualized GDP Growth in Q418 and 0.3-0.4% in Q119.
The first round of tariffs would represent a $20 Bn tax if they were all passed through to the consumer. If consumption fell by the full amount, it would equal slightly less than 0.1% of the level of GDP -- or 0.4% pt off the annualized quarterly growth rate when they hit. But, not all of the tariffs may be passed through. And, the tariffs could come out of savings rather than spending. Moreover, the dollar should strengthen, offsetting to some extent the impact of the tariffs on import prices -- although a stronger dollar also would hurt US exports. Net, I estimate about half the full effect hurting the US GDP growth rate.
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