Thread by @scottlincicome

So the folks at the Penn Wharton Budget Model have been doing so really interesting on trade lately. (thread) /1

In late July, they "project that even if the recently imposed tariffs are removed, GDP will be permanently smaller relative to having had no trade war." They also find long-term GDP losses from extending the trade war: budgetmodel.wharton.upenn.edu/issues/2019/7/… /2

Then 2 weeks ago, they found that the trade war "will actually *increase* the amount of American business capital owned by foreigners, by almost $1 trillion by 2028":
budgetmodel.wharton.upenn.edu/issues/2019/8/… /3

It's a classic and fascinating case of unintended long-run consequences: /4

Then today, they find that "in a trade-war scenario, we expect higher interest rates on federal debt, unless the Fed steps in. Higher interest payments on government debt would generate a worse outcome for the U.S. economy" budgetmodel.wharton.upenn.edu/issues/2019/8/… /5

Also "As the effective openness of the economy increases, interest rates decline. This correlation is consistent with the finding... that foreign purchases of U.S. government bonds have a significant inverse relationship to long-term interest rates." /6

That last part is especially noteworthy given recent proposals to tax foreign investment. /x