President Dennison was up before dawn on Monday tweeting about Chinese cars.

When a car is sent to the United States from China, there is a Tariff to be paid of 2 1/2%. When a car is sent to China from the United States, there is a Tariff to be paid of 25%. Does that sound like free or fair trade. No, it sounds like STUPID TRADE – going on for years!

— Donald J. Trump (@realDonaldTrump) April 9, 2018

Thanks, Mr. President! Nothing like waking up to find the President of the United States calling America “STUPID” to get the week started on the right foot.

Overnight, Bloomberg reported that China is “studying” a staggered yuan depreciation in an effort to ameliorate a situation where Trump slaps tariffs on enough Chinese exports to make it mathematically impossible for Beijing to respond proportionately/in kind.

So it looks like “winning” won’t be as “easy” as Trump swore it would be early last month in this famously retarded tweet:

When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!

— Donald J. Trump (@realDonaldTrump) March 2, 2018

In a new note, Goldman cites that tweet on the way to asking the following:

But how easy is it really?

Spoiler alert: the only way this is “easy” is if no one retaliates and if there are no ramifications for financial markets, both highly unlikely scenarios.

The bank begins by noting that “the additional tariffs—if implemented—would affect about 7% of US imports and raise the average US import tariff rate by 1.6 percentage points (pp) to 3.1%”:


Goldman then simulates the effects of a 10% tariff on all imports under three scenarios:

  • no retaliation from trading partners, and financial conditions do not respond to the trade measures (HR: they call this “unrealistic”)
  • allowing financial conditions (including interest rates, the dollar and equity prices) to respond endogenously to the tariffs using the financial market equations in the model
  • assuming in addition that trading partners retaliate proportionally to the US tariff by imposing a 10% tariff on all US exports
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