Trump's actions may not have a happy ending

The war of words between the United States and China has escalated rapidly over the last few days. On Thursday, US President Donald Trump upped the ante in the trade battle with China, suggesting further tariffs on $100 billion of imported goods from China, on top of the $50 billion announced on Tuesday.

Cumulatively, the $150 billion of threatened US tariffs represent 30 percent of total imports from China and roughly 5 percent of total US imports. And the $50 billion of threatened Chinese tariffs represent nearly 40 percent of total Chinese imports from the US.

If China responds to these $150 billion of threatened US tariffs in kind, the cumulative loss of GDP in 2018-19 could reach 0.3 percent in each economy with the US potentially loosing more than 300,000 jobs. Importantly though, these threatened tariffs will be subject to negotiation, and therefore shouldn't be considered as final.