Short-run impacts of the 2018 trade war on the U.S. economy: Annual losses from higher costs, $68.8 bn (0.37% of GDP); after tariff revenue & gains to producers, welfare loss is $6.4 bn (0.03% of GDP)

The Return to Protectionism. Pablo D. Fajgelbaum, Pinelopi K. Goldberg, Patrick J. Kennedy, and Amit K. Khandelwal. Working Paper, Mar 2019, http://www.econ.ucla.edu/pfajgelbaum/RTP1.pdf

Abstract: We analyze the short-run impacts of the 2018 trade war on the U.S. economy. We estimate import demand and export supply elasticities using changes in U.S. and retaliatory war tariffs over time. Imports from targeted countries decline 31.5% within products, while targeted U.S. exports fall 9.5%. We find complete pass-through of U.S. tariffs to variety-level import prices, and compute the aggregate and regional impacts of the war in a general equilibrium framework that matches these elasticities. Annual losses from higher costs of imports are $68.8 billion (0.37% of GDP). After accounting for higher tariff revenue and gains to domestic producers from higher prices, the aggregate welfare loss is $6.4 billion (0.03% of GDP). U.S. tariffs favored sectors located in politically competitive counties, suggesting an ex ante rationale for the tariffs, but retaliatory tariffs offset the benefits to these counties. Tradeable-sector workers in heavily Republican counties are the most negatively affected by the trade war.


Check also Krugman on Sep 2018: Trump’s tariffs really are a big, bad deal. Their direct economic impact ***will be modest*** (?!), although hardly trivial https://www.bipartisanalliance.com/2018/09/krugman-trumps-tariffs-really-are-big.html