Partial Equilibrium Trade Welfare Triangle
Sector-by-Sector Fiscal & Price Impacts
Sum of goods = $60,000,000,000| Sector | Trade Value | Base Tariff | New Tariff | Effective Cut | Annual Savings | Volume Expansion | Price Change |
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Economic Model Framework & $60B Deal Grounding
Diplomatic Context
Following high-level talks between Donald Trump and Xi Jinping, bilateral delegations agreed on a framework reducing punitive tariffs across an earmarked $60 billion trade tranche. This tool lets analysts, importers, and investors test the distribution of concessions across sensitive supply chains.
Microeconomic Formulas
We apply standard Armington-type partial equilibrium trade mechanics: import demand growth $\Delta M = M_0 \cdot \epsilon \cdot (\Delta P / P_0)$, where $\Delta P / P_0 \approx \rho \cdot (\tau_{new} - \tau_0) / (1 + \tau_0)$. Net welfare improvement equals tariff revenue forgone plus Harberger deadweight loss triangles recovered: $\Delta W = \frac{1}{2} |\Delta \tau| \cdot \Delta M$.
Supply Chain Pass-Through
Empirical studies on US-China tariff dynamics (Amiti et al., Cavallo et al.) demonstrate that near 80-90% of tariff adjustments transmit into border prices. Users can adjust pass-through ($\rho$) and import demand elasticity to stress-test margins.