It is without a doubt that the two bombshell tweets from President Donald Trump on Sunday indicated that the trade talks on tariffs and intellectual property issues had gone way south. News reports on Wednesday indicated that China’s representatives are coming to America to avoid a last-minute turn and to strike a deal in the final hours. What has happened that does not require interpretation is that the Office of the United States Trade Representative (USTR) already has filed its paperwork to formally raise tariffs to 25% from 10% on roughly $200 billion worth of goods coming from China per year.

While these numbers sound massive, it’s important to consider that the U.S. gross domestic product is now running close to $21 trillion on an annualized basis. The U.S. official unemployment rate is also at a 50-year low of 3.6%. If tariffs are going to go from 10% to 25% on $200 billion worth of goods, this might only represent an additional cost to the U.S. economy of about $30 billion (at a new $50 billion, versus a prior $20 billion) using straight-line math. If things were only so simple as straight-line math.

China already has warned that it will take necessary countermeasures if the United States raises its tariffs on Friday. That also sounds grave on the surface because of trade war implications. And what if the United States doesn’t stop at 25% tariffs ahead, in retaliation on our end for retaliation by China?

Some members of the financial media have had plenty of practice scaring the public into thinking that every cost increase might represent the end of the 10-year bull market or that a major stock market correction could be starting. Even worse, the media loves to warn that the next recession may be imminent.

24/7 Wall St. wanted to look at what the tariffs really mean to the broader economy and what the real impact might be. The USTR has formal trade figures from 2018 (or most recent annual data) concerning U.S. and Chinese trade facts. Again, the $200 billion is not the tariff amount. It is the 25% tariff versus an existing 10% tariff, and it’s not even unilateral on all goods.

The long and short of the matter is that the math just doesn’t really seem to add up to a recession. Whether the stock market wants to have a correction, big or small, it may simply be mechanical rather than a major change for the long haul. The goals behind seeking this trade deal have not really been about the short-term performance of the stock market, and the president has indicated in the past that there can be some acceptable giveback, considering how much the market has risen over the past two years. Investors who have been around for decades also understand that big corrections occur from time to time in the middle of great bull markets, often for reasons that may sound bleak in the middle of any given day but are forgotten within a week or month.

There absolutely will be some impact felt at certain companies in affected industries, and there undoubtedly will be some pressure in certain regions and industries. It also would seem to be inevitable that there could be isolated events of layoffs, furloughs, hiring freezes and financial losses in many street-level instances.

The USTR data showed that the United States’ combined goods and services trade with China totaled an estimated $737.1 billion in 2018. Of that, there were $179.3 billion in exports and $557.9 billion in imports. The total goods and services trade deficit with China was $378.6 billion in 2018.

China is currently the largest goods trading partner of the United States, with $659.8 billion in two-way goods traded during 2018. Goods exports to China were $120.3 billion last year and goods imports totaled $539.5 billion. The trade deficit in goods with China was $419.2 billion. China was shown to be the third largest goods export market for the United States in 2018, but China was also the largest supplier of goods to the United States, at 21.2% of all goods.

The balance shifted a bit in services for 2018. The total trade in services with China totaled an estimated $77.3 billion in 2018 when tallying up exports and imports. U.S. exports of services to China were $58.9 billion, while services imports were $18.4 billion. The United States ran a $40.5 billion trade surplus with China in the services sectors.

There is also a move to show how many jobs are tied to trade as well. Data from the U.S. Department of Commerce showed that the combined exports of goods and services to China supported approximately 911,000 jobs, using the latest data from 2015. Of that total 911,000 jobs, the Commerce Department showed that 601,000 were supported by goods exported and 309,000 supported by services exported.

There are some additional notes to consider that further show how China may have more to lose from the tariffs than the United States. U.S. goods exports to China in 2018 were $120.3 billion, and our exports to China accounted for only about 7.2% of total U.S. exports in 2018.

There was also some data shown regarding sectors and categories of the top U.S. exports to China:

• Aircraft, $18 billion
• Machinery, $14 billion
• Electrical machinery, $13 billion
• Optical and medical instruments, $9.8 billion
• Vehicles, $9.4 billion

China is the fourth largest agricultural export market for the United States. Exports of agricultural products to China in 2018 came to $9.3 billion. The top categories of domestic exports were broken down as follows:

• Soybeans, $3.1 billion
• Cotton, $924 million
• Hides and skins, $607 million
• Pork and pork products, $571 million
• Coarse grains (such as corn), $530 million

The top import categories are where things get sticky in expecting tariffs to act as a tax to businesses and consumers. The main groups of goods imported from China in 2018 were included with a total of $4.9 billion in agricultural products as follows:

• Electrical machinery, $152 billion
• Machinery, $117 billion
• Furniture and bedding, $35 billion
• Toys and sports equipment, $27 billion
• Plastics, $19 billion
• Processed fruit and vegetables, $1.2 billion
• Fruit and vegetable juices, $393 million
• Snack foods, $222 million
• Spices, $167 million
• Fresh vegetables, $160 million

U.S. foreign direct investment in China was $107.6 billion in 2017, up by 10.6% from 2016, and that was led by manufacturing, wholesale trade, and finance and insurance. China’s foreign direct investment in the United States was $39.5 billion in 2017, down 2.3% from 2016, and that was led by manufacturing, real estate and depository institutions.

At the end of the day, trade wars are not a win for any nation. Much of the aim by the United States has been to prevent and limit China’s handling of intellectual property when companies do business in China. The nation has been known for mandatory technology transfers and for duplicating intellectual property within systems, held in patents and so on.

Another consideration here is that the current expected outcome of a trade war would be worse for China than it would be for the United States. Most U.S. companies do not have to rely on Chinese intellectual property, and after a period of transition, the manufacturing of electronics, machinery, parts and other goods done in China could be steered to other nations. That has even begun in some cases, and it has been contemplated in many others.

What if China would choose to adopt further currency devaluation measures? Or what if China decided it wants to teach a lesson to the United States by dumping its Treasury securities? Of the $22 trillion or so in U.S. debt, more than $6 trillion was said to be owned by foreign governments and central banks. As of June 2018, China owned just $1.18 trillion, followed by $1.03 trillion owned by Japan. China could create a short-term situation in U.S. Treasuries, but at not even 5% of the total debt it may be harder to influence the bond market than in the past. China also needs to keep some of that debt as part of its reserve assets as well.

It would be silly to predict that a trade war with China would have no impact on the broad economy and the markets at all. Unless a full-blown trade war of one-upmanship ensues, which neither country nor the world can afford, it’s important to keep all of these figures in mind. It just might not be the end of the world.

There are eight U.S. brands with large exposure to China that might face pressure or boycotts if the rhetoric heats up too much, but there are also five rather large U.S. companies with zero exposure to China to which investors can turn.

In the three trading days since the news broke, the major Chinese exchange-traded funds were down 5.6% to 8.5%. The major U.S. equity indexes are down far less. The Dow Jones industrials were down about 1.8% since last Friday. The S&P 500 was down less than 2%, and the tech-heavy Nasdaq Composite was down about 2.3% in that time.

Note that the SSE Composite (Shanghai) was down about 6.3% and the Hang Seng (Hong Kong) was down 3.5% as well.

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