ie what happens if global demand exceeds supply and a lot of companies have never tried to find other markets because of the inertia required to do so - but if they are pushed by tariffs they find there are alternative customers out there.
As an example - Canada appear to replaced trading food for cars with the US, to food for cars with China.
https://www.facebook.com/TechXnew/posts/canada-has-made-a-de...
> to the surprise of absolutely no-one with even the most basic grasp of how economies function.
it also assumes that there are no other alternative markets to sell to or that supplier capacity is equally elastic; the US might be a high margin market to sell to, but if you only have a fixed amount of product to sell then it makes no sense to eat the high cost of a tariff to keep selling a low margin product when you can instead sell your product at a medium margin in europe
building out more supply for a product is often capital intensive if you want to make it at an economically efficient price point in these times; efficiencies of scale are hard to overcome and a rapid shift of economic policies makes anyone uncertain about future investment so it takes a very long time for these supply chains to rebalance, if they ever do
That's a huge 'if'.
No, it is surprising, as noted in the article, because basic economics suggests that suppliers will adjust pricing, and eat some of the tariff to keep their products competitive. Page 5:
This finding was initially surprising to some observers. Standard economic models suggest that the incidence of a tariff depends on the relative elasticities of supply and demand. If foreign exporters face highly elastic demand (meaning buyers can easily switch to alternatives), they might be expected to absorb part of the tariff to remain competitive.