Justification not yet generated — showing supporting facts

• Under Scenario 3, U.S. counties in the Mountain West, Great Plains, and Southeast experience average tariff levels of 2-7 percent because these regions are less reliant on global supply chains or major manufacturing hubs.
• Modern firms utilize complex supply chains that stretch across international borders, which differs significantly from the trade landscape of over a century ago when the United States last used tariffs to fund the government at scale.
• Trade diversion, which occurs when firms shift to alternative suppliers to avoid tariffs, often results in higher transportation costs, supply chain inefficiencies, and shifts to suppliers that may not offer the same price, quality, or reliability.
• Following the 2018-19 U.S. tariffs on Chinese imports, many firms shifted supply chains to countries such as Mexico and Vietnam rather than returning production to the United States.
• The impact of tariffs on consumer prices depends on how importers manage the resulting increases in supply chain costs.
• The economic outcomes of tariff-induced supply chain interactions are complex and difficult to predict.
• Proposed tariffs may raise input costs, disrupt supply chains, and result in higher consumer prices, potentially outweighing any targeted employment gains in protected industries.
• The share of United States imports originating from China decreased from 22.0 percent in 2017 to 13.8 percent in 2024, reflecting business adjustments to the 2018-2019 tariffs by shifting supply chains to alternate trade partners.
• Supply chain delays and shortages resulting from tariffs can extend construction project timelines and increase labor costs.
• Supply chain costs persist despite tariffs because if a cheaper, non-tariffed supplier of equal quality existed, they would already be in use.
• When used strategically and temporarily, tariffs may help foster domestic industry growth and encourage investment in alternative supply chains.
• Tariffs on steel and trucks, which are often produced overseas, increase expenses for transportation and logistics companies, specifically regarding equipment purchases and supply receipt delays.
• "How can we plan if we do not know what the tariff situation is for the next five years? Factory and supply chain sourcing decisions cannot be changed at moment's notice."
• Nike shifted its textile sourcing from China to suppliers in Vietnam and Bangladesh following the imposition of tariffs on Chinese textiles, which caused initial supply chain delays.
• A full-scale EU tariff escalates tariff exposure from a regional issue to a national economic concern, increasing the potential for widespread supply chain disruption and cost pass-throughs.
• Unlike sales taxes, tariffs on imported goods occur upstream of the point-of-sale, which creates increases in supply chain costs for importers.
• Earlier tariffs on Chinese imports had relatively muted economic impacts because firms shifted their supply chains.
• In the First Quarter 2025 CFO Survey, over 50 percent of manufacturing CFOs reported planning to diversify supply chains, nearly 40 percent accelerated purchases, and a considerable share sought alternative foreign suppliers in response to trade disruptions.
• U.S. communities dependent on manufacturing and cross-border inputs may face rising production costs, disrupted supply chains, and downstream employment effects if proposed tariff increases are implemented.
• According to a 2025 survey by the National Association of Manufacturers, 30% of small and medium-sized enterprises reported cash-flow issues due to the difficulty of pivoting supply chains in response to tariffs.
• Identifying a new supplier to avoid tariffs is often ineffective because if a supplier providing the same input at the same quality for a lower price existed, they would already be in use.
• Tariffs generate less revenue over time as firms and consumers change their supply chains to avoid the tax.
• The Richmond Fed's 'Scenario 3' model builds on 'Scenario 2' by adding a 25 percent tariff on all automobile imports, which significantly impacts sectors tied to the automotive supply chain.
• While tariffs have an immediate inflationary impact by raising import costs, long-term effects depend on how businesses adjust supply chains, such as shifting to alternative suppliers or increasing domestic production.
• Supply chain disruptions caused by tariffs can extend production timelines and increase operational costs for manufacturers.
• Firms in construction, mining, and utilities reported taking proactive measures such as diversifying supply chains and identifying new domestic suppliers in response to tariff-related disruptions.
• Some supply chain cost increases resulting from tariffs cannot be absorbed by importers, which can lead to the elimination of certain products from the marketplace.
• Firms are planning to diversify supply chains in response to proposed tariffs, but these adjustments take time to implement.