Are tariffs bad for growth? Yes, say 5 decades of data from 150 countries (2020)

On average, establishing a new factory takes between 3 to 5 years. Tesla stands out as an exception. Its factory in China was built in just 2 years, and the German facility in 2.5 years. However, this is largely due to Tesla vertically integrated supply chain.

For most traditional automakers, certifying a new supplier alone can take several years. This means that if a new administration were to reduce tariffs mid-cycle, companies could find themselves locked into 3 to 4 year investments that ultimately make their products less competitive.

Even with a uniform 20% tariff, lower labor costs in countries like Mexico or China still make manufacturing there more attractive. Unless we’re talking about high value, low labor industries, like for example semiconductors or medical devices. Reshoring remains unlikely. The more probable outcomes are increased inflation and economic slowdown...

And this is without factoring in potential retaliatory tariffs targeting U.S. sectors like defense or aerospace. Imagine a scenario where Boeing is limited to the U.S. market, while Airbus continues to enjoy global access...