Firms can now plan for trade shocks years in advance

Companies that buy and sell goods internationally will now have better tools to predict how long it takes for trade disruptions to affect them. This means businesses can plan for changes in supply chains and customer demand more accurately, potentially avoiding short-term losses.

For decades, economists have known that trade adjustments take time, but the exact pace was hard to pin down. This research provides a model that explains why it takes so long for trade flows to change and how companies' decisions to stick with old suppliers or find new ones create these delays. It shows that anticipating a trade shock, like tariffs, can cause companies to shift sourcing years before the shock actually hits, and that these shifts can lead to short-term pain but long-term gains.