How will China respond to additional US tariffs?

If the USTR follows through on Trump’s request to add an additional $100bn worth of Chinese imports to the proposed US tariff list, the Chinese will be reluctant to capitulate and seem likely to respond by expanding their own tariff list. In this case, our estimate for the potential damage to China’s economy would rise from 0.1% of GDP to closer to 0.5%. These higher stakes increase the urgency of reaching an agreement with the US but also risk a more damaging outcome if talks break down.