2019-05-13

Trade War Question

I want to buy $500 worth of Chinese consumer goods and the tariff raises the price to $625, I don't buy the goods.
Instead, I buy $500 worth of German consumer goods.
What happens to U.S. GDP? Chinese GDP?
Instead, I spend my $500 on American consumer goods and services.
What happens to U.S. GDP? Chinese GDP?

People go bananas over the BLS using hedonic adjustments and substitution assumptions when it comes to inflation calculations, but ignore how consumers will react to tariffs, plus the secondary and tertiary impact of increased domestic economic activity.

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