Market participants appear to be scratching their heads on Tuesday at the muted reaction across global equities to the latest escalation on the trade front from the Trump administration.

That perplexity is understandable to the extent folks were anticipating a marginally sour session in Asia and some pressure on EM, but nobody should be surprised that there wasn’t some kind of brutal selloff. After all, this was easily the most well-telegraphed escalation yet. On Friday and over the weekend, at least a half dozen media outlets confirmed that the administration was moving forward this week, which means markets had at least one day to price this in and in the case of U.S. equities, a day and a half (Bloomberg’s original story confirming the tariffs hit late Friday while the market was still open). And really, this has been known for weeks.

As far as the actual details go, it’s a mixed bag. Conceivably, you could view the decision to hold off on a 25% tariff rate until 2019 as “positive”, but that ignores the possibility that the delay on implementing the more punishing rate is just Trump giving U.S. companies a few months to search out alternate suppliers. If that’s the case, the “wait and see” approach to the 25% rate is actually negative as it suggests the administration is girding for a protracted war of attrition.

The real question mark is how China will retaliate. Beijing on Tuesday delivered the expected initial response: Differentiated tariffs on $60 billion in U.S. goods.

But going forward, the calculus might change. Earlier this month, Trump tipped his inclination to view any retaliation as an excuse to ratchet up the tensions further by slapping duties on another $267 billion worth of Chinese goods, a move that would entail taxing everything China ships to the U.S. That intention was reiterated last night and today.

If you’re wondering what Goldman thinks, their take is mixed. Here’s Jan Hatzius:

Tariffs will initially take effect at 10% on those products but are scheduled to increase to 25% on January 1, 2019. In its initial phase, this is a less restrictive outcome than the roughly 20-25% average tariff rate we had assumed.

By contrast, the amount of imports subject to immediate tariffs is greater than we assumed. We had expected that the Administration would revise the list and that a portion of it would be implemented in a later stage. Instead, the list is mostly unchanged and we estimate that $180-190bn of imports (2017 levels) will be subject to tariff in one round starting September 24.

Goldman notes that the composition of the final list is broadly consistent with the initial list, despite the removal of 300 items (shares of intermediate, 48%, capital, 30%, and consumer, 22%, goods generally in line with those in the original list).

For Goldman, the chances that Trump takes this all the way (i.e., “goes to $500 billion“) are pretty high.

“In light of China’s previously announced plans to impose retaliatory tariffs on $60bn of imports from the US, we believe the US could announce plans to impose tariffs on ‘phase three’ within the next couple of weeks”, the bank says, adding that “while the situation is highly uncertain, at this stage we believe it is likely that the White House will propose an additional round of tariffs [and] there is a slightly greater than 50% chance that the tariffs will take effect in early 2019.”

Again, if Trump goes to “phase three” that would be all-out war.

What’s interesting is that while administration officials are keen on pointing to the trade imbalance as evidence that China is “out of bullets” now that the U.S. has slapped tariffs on more in Chinese imports than the total amount of goods America exports to China, the U.S. will itself hit the same limit after “phase three”.

As far as the impact on inflation is concerned, here are Goldman’s estimates:

We expect that the initial 10% tariff on this list should boost core PCE inflation by roughly 3bp (yoy), and by a cumulative 8bp if the rate steps up to 25%. We expect the effect on real GDP growth in the US to be very modest as well.

Do note that those numbers would likely change materially in the event Trump does indeed go all in.