Devetra - Great question and one that trade specialists and economists are reporting on continuously (I read at least 2-3 articles a day on this now). Marc and Elyse provided great answers already, so not much I can add. On a large scale, tariffs will have a negative impact on the economic output (gross domestic product) of the countries initiating the tariff war. The harder question is how to gauge the impact on a more minute level. The butterfly effect (https://en.wikipedia.org/wiki/Butterfly_effect) comes to mind here, as does the economic idea of u<span style="color: rgb(0, 0, 0); background-color: transparent;">nintended consequences (</span>https://en.wikipedia.org/wiki/Unintended_consequences). As an example, the U.S. raises tariffs on steel, so U.S. firms that use steel to manufacture bulldozers have higher manufacturing costs and have to raise the price of their products (i.e. U.S. bulldozers are now more expensive). Since foreign steel is now more expensive in the U.S., U.S. demand decreases, which provides more supply of foreign steel to international markets. We know more supply means lower prices, so companies that make bulldozers in other markets (let's say Japan), can now make their product for less (i.e. Japanese bulldozers are now cheaper). This means the cheaper Japanese bulldozers are more competitive in global markets and also in the U.S. than the more expensive U.S.-made bulldozers. So, the U.S. steel industry may benefit from the higher tariff, but the U.S. bulldozer industry loses. Now play this example out over other sectors that use steel as an input (and this example is related to steel only, not the hundreds of harmonized tariff schedules (https://hts.usitc.gov/) in the current dispute with China). Marc also correctly points out how supply chains will alter as firms try to diversify their suppliers. I worked in Vietnam for four years and saw the continued increase in foreign direct investment there as US, Asian, and Chinese firms all invested in manufacturing there. The interest in investing in locations like Vietnam, Thailand, and Bangladesh has increased since the trade dispute between the U.S. and China, and will likely continue even once the two sides reach agreement.
Stuart recommends the following next steps:
- As a next step, I would suggest picking a product or sector that interests you, investigate how it is directly impacted by the tariff, and then try to figure out how the tariffs will indirectly impact the supply chain of this product or related products. There are a few US government resources you can use (like www.export.gov), but many will be inaccessible during the current shutdown.