US-China Bilateral Tariff Cut & Trade Welfare Simulator

Trade Parameters

Bilateral Package

Scenario Presets

Covered Trade Value $60.0B

Total annualized value of bilaterally negotiated goods subject to tariff adjustment.

Pre-Deal Baseline Tariff 25.0%

Weighted average Section 301 / reciprocal tariffs prior to summit accords.

Tariff Rate Reduction (Cut) -12.5% pts

Negative represents tariff rollback (e.g. 25% down to 12.5%). Positive represents escalation.

Importer Pass-Through Rate 70%

Share of duty relief transferred to domestic wholesale and end-consumer prices.

Armington Import Elasticity (ε) 1.60

Price sensitivity of import volume (% Δ volume per 1% Δ landed cost).

Annual Duty Relief

$7.50B

Direct tariff outlay reduction

Consumer Welfare Gain

$5.63B

Consumer surplus expansion

Import Vol Creation

+$6.72B

+11.2% volume expansion

Customs Revenue Delta

-$6.66B

Federal tariff intake change

Sector Distribution & Welfare Breakdown

Simulated dynamic trade allocation and deadweight loss recovery

Sub-Sector Breakdown ($60B Basket)

Harmonized Schedule Categories

Sector Category	Share	Baseline Value	New Effective Tariff	Duty Savings	Est. Volume Expansion

Simulation active: $60.0B goods basket modeled under 12.5% tariff cut.

Empirical Trade Mechanics & Armington Elasticity Model

1. Consumer Surplus & Pass-Through Calculates domestic price relief: $\Delta P = P_0 \times \Delta t \times \tau$. Importers share cost reductions with domestic buyers based on market concentration and retail elasticity.

2. Trade Creation vs. Diversion Volume response follows the Armington assumption: $\Delta Q = Q_0 \times \left(1 - \epsilon_d \times \frac{\Delta t}{1 + t_0}\right) - Q_0$. Lower barriers restore natural bilateral trade flow.

3. Fiscal & Deadweight Efficiency Customs tariff revenue shifts from $R_0 = t_0 \times Q_0$ to $R_1 = t_1 \times Q_1$. Deadweight efficiency triangle recovery: $DWL = \frac{1}{2} \times \Delta t \times \Delta Q$.