Trade and globalization today are not the same as 50 years ago. In the old world or stylized world of trade, final goods are shipped between locations. Raw materials are traded for a finished good. It was easy to see where the value-added was generated. Of course, there still are finished goods traded for finished goods, but a growing portion of trade is in unfinished goods as part of a supply chain. In the supply chain trade, a single corporation may outsource the manufacturing of some parts in another country, which is then sent to another country, and then finally sent to the US for finished production.
Production is determined by labor costs and specialization, as well as the transfer price for parts. Welcome to multi-national supply chain trade. Hence, the tariff on a part may only be a small part of the total cost of production, but the impact of tariffs becomes hard to measure because many goods made in the US may have components from a foreign country. If tariffs impact deliveries, while parts are assessed for tariffs, there will be a disruption of the supply chain, which will impact the finished production. There will be a congestion "tax" associated with the processing of imports, which will create bottlenecks across the US. We are not making a value judgment but rather assessing the impact of tariffs and what they may do to the US economy.
There needs to be a realization that any economy is a complex system, which means that disruptions to the processes that make the connections across production will have an impact on the system and will require adjustments that will cost both time and money.
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