Economic Impact of the Tariff Announcements: An Event Analysis (A Tellusant Quick Read)

In the evening of Wednesday, April 2, the White House announced global tariffs. This is an <b>event analysis</b> that quantifies impact on <b>GDP growth</b> as a nowcast. The analysis was publicly announced (LinkedIn) on April 2 before any outcomes were known.The method is to take the stock market index immediately before the announcement (here market close on Wednesday, April 2), and compare it to the the same index exactly 3 workdays later (here market close on Monday, April 7).This is then converted into <b>GDP impact</b> using the 'perpetuity with growth present value' formula cut off at a) eternity, and b) 5 years.<br><br>We find that all the 5 major economies' GDP—U.S., China, EU, Japan, and UK—are negatively impacted. This is expected since the law of comparative advantage is at play.<br>We further find that China holds up the best; Japan the worst.The size of the impact on annual GDP growth ranges between -3% and -0.1% depending on assumptions.<br>