The Trump administration plans to impose 25 percent tariffs on Chinese products starting July 6, 2018. Almost all of the targeted products are intermediate inputs and capital equipment—used by US companies to make final products and remain competitive in the global marketplace. But the same products targeted by tariffs are available in other countries too, like Mexico, Japan, Canada, and Germany. Companies will need to evaluate varying product quality and prices across countries. Depending on the product, it may be more advantageous to pay the Trump tariff and stick with the same Chinese product or buy a higher-quality input from an alternative source—either way likely raising prices for consumers.
This PIIE Chart was adapted from Mary E. Lovely’s blog, “Companies Have Workarounds in Trade Wars—But Consumers Will Have to Pay”