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MIT SMR Strategy Forum
Each month, we pose a question about business, management, technology, or public policy to our panel of academic experts. Here you can see what they think and why.
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We asked our panel of strategy experts to tell us how strongly they agree with this statement:
A trade war will be more disruptive to business than to consumers.
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Raw Responses
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Responses weighted by panelists’ level of confidence
Panelists
| Panelist | Vote | Confidence | Comments |
|---|---|---|---|
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Disagree | 5 | |
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Neither Agree nor Disagree | 4 | “Both businesses and consumers in targeted sectors will be affected more intensively than in other sectors. Tariffs that induce inefficiency to redistribute wealth will ultimately fail. ” |
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Agree | 8 | |
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Agree | 8 | “Trade wars both raise prices and create uncertainty. The uncertainty is often worse than higher prices. (This is why putting a sunset clause into the trade deal with Canada was a clear poison pill.) ” |
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Strongly Agree | 7 | “Consumers face possible high costs but have the availability of substitutes. Firms risk losing market access and/or viability — a loose analogy to a displacement of a Cournot equilibrium to a Bertrand equilibrium.” |
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Strongly Agree | 8 | “The first-order effects of trade barriers are to rearrange supply chains as consumers make substitutions. Trade barriers on intermediate goods (like steel) are even more disruptive for businesses.” |
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Neither Agree nor Disagree | 5 | “What harms businesses will likely hurt its consumers; what harms consumers will likely hurt the firms from which those consumers demand goods and services.” |
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Neither Agree nor Disagree | 5 | |
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Agree | 6 | “A trade war is disastrous for both business and consumers. Trade barriers stunt productivity, good management, innovation, and wages. See Trade Induced Technical Change? The Impact of Chinese Imports on innovation, IT and Productivity (2016).” |
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Agree | 8 | “With global supply chains, tariffs impact again and again on those chains. The cumulative effect can be quite large and force businesses to move bits of production.” |
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Agree | 6 | “A trade war will be particularly disruptive to businesses as they scramble to reconsider and perhaps reconstruct supply chains. By contrast, consumers will be stuck — they will either pay or not.” |
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Neither Agree nor Disagree | 6 | “The pain will be shared — consumers will see higher prices and business relief will be limited.” |
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Agree | 6 | “Some businesses will suffer concentrated losses — especially businesses that see overseas demand shrink or input costs rise. This will be more disruptive than the diffuse losses suffered by consumers.” |
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Strongly Agree | 10 | “Firms often face switching costs to change suppliers (e.g., specialized components, contracting costs, etc.) Consumers usually have multiple alternatives and lower switching costs.” |
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Strongly Agree | 9 | “Consumers can more easily adjust what they choose to buy than businesses can shift the locations of their supply chains.” |
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Agree | 5 | “Factories are hard to start and easy to close, so trade wars cause terrible disruption of supply chains, with very slow recovery for businesses and workers.” |
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Strongly Agree | 5 | “A trade war is going to impact both businesses and consumers — the immediate effect will likely be felt more in business-to-business transactions, but cumulatively, there will be a lasting impact on consumers.” |
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Strongly Agree | 9 | “The impact of the ongoing trade war will be quite highly concentrated, so it will be felt first and foremost by individual businesses. The impact on consumers will be delayed and diffuse.” |
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Agree | 7 | “In the short run, it will be very disruptive to business (as we have already seen), but eventually that will flow through to consumers.” |
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Strongly Agree | 9 | “Trade wars hurt everyone, but intermediate goods markets are a much larger fraction of the economy than final goods. Uncertainty over price and availability hurts business planning and operations.” |
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Strongly Agree | 8 | “Price increases will be shared between firms and consumers. Most firms will not pass through 100% of a cost increase. But the disruption to global supply chains will be felt more keenly by business.” |
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Agree | 8 | “Consumers will face price increases that will be annoying but not call for fundamental changes to their daily lives. Some businesses will actually be forced out of business — true disruption.” |
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Neither Agree nor Disagree | 8 | “Depends on whether the tariffs are on final or intermediate goods and on the consumers’ price elasticity of demand for final goods.” |
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Did Not Answer | ||
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Did Not Answer | ||
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Did Not Answer | ||
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Agree | “Consumers will be hurt but will re-optimize their purchases to minimize the impact. Businesses face more extreme shocks; some will hurt and others not. Unpredictability is very harmful for business.” |