Tariff Impact Event Analysis

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>.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 ranges between -3% and -0.1% depending on assumptions.<br>