Summary of How Much Will a Trade War Hurt Your Company?

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The revamp of the North American Free Trade Agreement, trade skirmishes with the European Union and potentially more than $500 billion in tariffs on Chinese goods are escalating US trade conflicts with both allies and foes. Yet, for all the rhetoric and noise, tariffs will affect stakeholders in different ways. This informative report by Boston Consulting Group professionals Christian Ketels and Martin Reeves explores the complex labyrinths of the current trade imbroglio and provides a valuable overview of its implications for business owners and executives.

In this summary, you will learn

  • How trade conflicts affect the global economy,
  • What impacts tariffs have on stakeholders across industries and
  • How business leaders can protect their companies.
 

About the Authors

Christian Ketels is chief economist at the Boston Consulting Group, where Martin Reeves is a senior partner and managing director.

 

Summary

The tariff war that the United States is waging with China and other countries could have considerable consequences for governments, businesses and consumers. Policy experts differ widely on their estimations of tariff headwinds on global growth. Some forecasts indicate a loss of US GDP of “one to two basis points” and a cut in world output of less than 1%, while others predict declines of 5% and 2.5%, respectively. While a tariff’s impact on growth throughout the economy – the overall “welfare loss” – is fairly small, businesses and consumers can prosper or suffer at much higher levels. In the steel industry, a proposed US tariff of 25% would enable domestic mills to gain market share and higher profit margins at the expense of end users and foreign producers. The welfare loss totals just 0.5% of market revenue, but overseas competitors would see one-third of their sales disappear, for a loss of 10% of market revenue. 


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