The trade war of 2025 is very different than those in the past, as it came with "extreme uncertainty," according to Jason Miller, Eli Broad Endowed Professor in Supply Chain Management at MSU and author of a new study from Michigan State University.
The paper outlines a theoretical framework around categories of costs firms must navigate in response to tariffs: adjustment costs, transaction costs, and the opportunity costs of responding too early or too late.
These costs influence a firm’s ability, and willingness, to shift suppliers, relocate production or pass price increases on to consumers. The framework builds on and extends existing theory by directly incorporating the role of uncertainty and potential misconduct in firm responses, offering a more comprehensive view of how firms navigate trade shocks. Unlike previous trade disputes, the 2025 tariffs were enacted, reversed and reinstated in rapid succession, creating a volatile environment that makes planning nearly impossible.
“I’ve spoken with industry professionals who have described large importers having at least five, and sometimes 10, different plans sketched out because they cannot anticipate what the final form of tariffs will look like,” said Miller, in a statement.
Societal Impact
While the study is anchored in supply chain theory, the authors emphasize that these disruptions have real societal consequences for households and consumers.
“Imported food products, from fruits to coffee, are particularly sensitive to trade policy changes,” said David Ortega, the Noel W. Stuckman Chair in Food Economics and Policy at MSU, in a statement. “When tariffs are imposed or threatened, that leads to price increases, sourcing challenges and more strain on lower-income households.”
The authors note that products with limited domestic production, such as bananas or pineapples, offer little room for substitution, which makes food prices especially vulnerable to trade shocks.
“Tariff-driven price increases have real-world consequences,” said Ortega. “They shape what people can afford at the grocery store, and retaliatory actions from other countries can impact what farmers grow. These ripple effects matter and affect everyone.”
A roadmap for research and policy analysis
Beyond the framework, the paper outlines various research directions and provides a curated list of data sources, ranging from firm-level trade records to import/export price indexes and sector-specific data. These tools allow researchers to analyze:
- how and when firms shift sourcing to different countries;
- the extent of tariff pass-through to retail prices;
- the timing of inventory buildups or front-loading of imports;
- instances of potential misconduct, like falsifying country-of-origin documentation.
“The framework offered by our research can help the industrial sector navigate our new and uncomfortable reality as a stable global supply chain built on a belief in free trade gives way to rising geopolitical uncertainty and protectionism,” said Henry Jin, associate professor at Miami University’s Farmer School of Business, in a statement.
