@Brad_Setser: To state the obvious, a 25% ta...

To state the obvious, a 25% tariff on Mexico and Canada and a 10% tariff on China, if sustained, would be a massive shock -- a much bigger move in one weekend than all the trade action that Trump took in his first term

1/x

The just pay it cost of the tariffs on Mexico and Canada would be about 0.8 pp of US GDP (imports are ~ 3.2% of GDP). The just pay it cost is crude, but it usually a pretty good rough guide the actual impact -- as many effects offset.

2/

The 10% tariff on the 1.5% of US GDP that the US still imports from China ($400b or so in the US data) adds another 15 bp of GDP to the total, and brings the total "just pay it cost" up to about 1 pp of US GDP (leaving out retaliation)

3/

And there aren't any offsetting tax cuts right now, this is basically a 1 pp of GDP regressive tax hike (hard to get around a tariff suddenly imposed unless you try to wait it out)

4/

By comparison, the full Trump 1 tariffs on China amounted to a 15 pp increase in the tariff level (from 3 to 18%) on 2.6% of GDP, or a 0.4 pp of GDP tariff hike in "just pay it" terms. And that tariff was phased in over 2 years.

5/

So this is easily 2x bigger in economic terms than all of the Trump term 1 tariffs on China --

6/

The biggest single action in the US-China trade war was raising "list 3" tariffs from 10 to 25%. That impacted $200b of imports: the just pay it cost was $30b (15 bp of GDP back then). The 10% tariff on $400b from China is bigger in dollar terms and comparable in GDP terms. 7/

These tariffs are all intended as "leverage" (even the 10% tariff on China) so they may not be permanent and may not have the full annual impact, but make no mistake, this is a major tax hike -- and this analysis also leaves out retaliation

8/

And one little tidbit - the 10% across the board tariff will hit $40-50b in iPhone imports. The import cost of a phone is around $00 a phone, so less than the retail cost. Will see what Apple chooses to do with its prices ...

9/

But an across the board tariff means hitting the goods (iphones, many toys) that Trump's term 1 team intentionally left out their lists, for various reasons (Tim Cook's lobbying, a desire to avoid raising consumer prices before Xmas, etc)

10/10