When Donald Trump announced punitive tariffs on some $50 billion of Chinese imports two weeks ago, the business world held its breath in expectation of the Chinese response. When China hit back this week with tit-for-tat tariffs on $50 billion of American goods, no one in the business world was surprised. The business press went into full panic mode, but business reality hardly changed.

The United States and China are the world’s two largest economies, two of the most closely integrated. With roughly $650 billion in goods and services flowing across the Pacific every year, the trading relationship between the U.S. and China is second in size only to that between the U.S. and Canada. Throw in Hong Kong, and America’s total China trade is even bigger than its cross-border trade with Canada.

Figures like these make the prospect of a trade war seem serious indeed. Every drop in the Dow Jones Industrial Average for the last two weeks has been ascribed to the tit-for-tat spat. But a longer perspective throws cold water on those claims. On Wednesday, March 21, the day before Trump’s momentous announcement, the Dow closed at 24,682. Two weeks later, on April 4, it closed at 24,264. The total two-week decline was just 1.7%.

That’s hardly the stuff of economic armageddon. Do the markets know something the business press doesn’t? Almost certainly the answer is “yes.” People with skin in the game are betting on the performance of individual companies, not a general feeling about the state of the global economy. And the reality is that the much-ballyhooed trade war between the U.S. and China is likely to affect only a small handful of stocks.

It’s all about integration

When most people think about international trade, they focus on the things you can take pictures of, like grain being loaded into a bulk carrier, or cars rolling off transport ships. But most trade isn’t like that. By far the majority of the world’s trade in today’s integrated global economy is trade in intermediate and capital goods.

Intermediate goods are the parts and pieces that go into making final consumer goods, like the computer chips that power our smartphones. Capital goods are the machinery and equipment that are used to make other things, like chip fabrication units. Most countries avoid putting tariffs on intermediate and capital goods because they need these goods as inputs for their own production. So when China slapped retaliatory tariffs on the U.S., it focused instead on bulk commodities like meat, fruit, and steel.

American farmers will no doubt squeal like pigs, but the fact is that if China slaps a tariff on American pork, Canadian pork will replace American pork in the Chinese market, with American pork taking up the slack left over by Canada in the South Korean market. With the exception of a small number of branded specialty products, pork is pork. Commodity markets like pork work on the balloon principle: squeeze them somewhere and the supply just goes somewhere else.

As long as you don’t squeeze too hard — and China won’t squeeze very hard. China’s imports from the U.S. come to around $170 billion (2016 figures). America’s imports from China, at nearly $480 billion, are nearly three times as large — and nearly all of these imports are consumer goods. China simply can’t afford to squeeze the U.S. with tariffs, because the U.S. has so many more imports to squeeze.

Technology transfer

Trump’s authority for imposing tariffs on Chinese goods is based on Section 301 of the U.S. Trade Act of 1974, which allows the president to retaliate against unfair trading practices. Trump’s Office of the United States Trade Representative accuses China of “policies that coerce American companies into transferring their technology and intellectual property to domestic Chinese enterprises.”

It is an open secret — not even a secret — that forced technology transfer is part of the price of doing business in China. That’s why foreign automakers in China operate in joint ventures with local Chinese companies. There’s even an academic literature evaluating the effectiveness of China’s technology transfer strategy, which stands out as one of the world’s most successful. It’s also completely illegal under World Trade Organization rules.

Trump’s proposed tariffs (they won’t go into effect until May at the earliest) are intended to force China into concessions on technology transfer. If Trump was the president of a one-party state, they just might succeed. But the United States is a democracy, those squealing farmers are well-represented in Congress, and midterm elections are coming up in November.

As a result, the most likely outcome of this year’s “trade war” is that the tariffs will be suspended in recognition of symbolic commitments from China to behave better in the future. Economically speaking, China can’t afford a trade war with the United States, but politically speaking, Trump can’t afford one either. So follow the market, and expect a return to business as usual in time for the midterms, if not earlier.