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Political bias might be interfering with the accurate dissemination of information on how the tariffs on China will impact the US economy. The players opposing tariffs say it will reduce GDP and those supportive of this tariff suggest it will increase GDP. STariffs and GDP impact
Political bias might be interfering with the accurate dissemination of information on how the tariffs on China will impact the US economy. The players opposing tariffs say it will reduce GDP and those supportive of this tariff suggest it will increase GDP. So which is it? The outcome is rather unclear. The GDP impact depends on a combination of economic interactions that could lead to either side being correct depending on what assumptions are used and what retaliatory actions result. In order to cut through the political bias, it is important that we understand the underlying mechanisms. The impact of tariffs is of high importance to market participants as it directly impacts which way the market moves. GDP is calculated using personal consumption expenditures, gross private domestic investment, government consumption and investment, and net exports. The tariff on China will likely impact (directly or indirectly) all four of the GDP inputs to varying degrees. Impact on each variable Consumption spending will likely go down as a result of tariffs. If one solely considers the consumption of Chinese goods, the increased expense of consumption will reduce the volume of purchases. Read more