Willy Shih, an economist and professor at Harvard Business School, argues that market forces are already finding ways to bypass new trade barriers, meaning tariffs on Chinese goods will likely result in higher prices for American consumers rather than a return of manufacturing to the US.
The Wisconsin prediction
The author first gained attention in 2019 when he correctly predicted that Foxconn would not build an LCD factory in Wisconsin. Shih explained that the local supply chain simply lacked the necessary infrastructure. He noted that a panel factory requires massive amounts of structural steel and concrete to remain stable. When local residents later showed him plans, he pointed out there was not enough concrete in the area to support such a facility.
That assessment proved accurate. The project never materialised, even though the community had hoped for jobs. Shih uses this example to illustrate how physical constraints and economic logic often override political promises.
Globalisation is still working
Despite recent political rhetoric suggesting the end of globalisation, Shih maintains that the system is driven by first principles of economics. When governments impose tariffs, manufacturers look for new routes to keep costs down. He cites the example of cashew nuts grown in the Ivory Coast or Ghana but labelled as coming from Vietnam. Similarly, frozen fish caught off the coast of Alaska are shipped to Qingdao, China, for processing before returning to the US because it is cheaper that way.
Trade barriers often trigger circumvention strategies. Shih points to import data from Ireland as evidence. In the first quarter of 2025, imports from Ireland hit record highs. This was followed by a drop in the first half of 2026 as companies burned through that inventory. The spike occurred because firms moved goods through Ireland to avoid tariffs on Chinese products.
The new shipping lanes
Recent trade data reveals new shipping routes from China to Mexico. Direct ocean container services have increased over the last two years. Shih explains that these lanes allow companies to ship parts and components from China to Mexico, assemble them there, and then import the finished goods under the USMCA agreement. This strategy keeps final assembly in North America while sourcing components from China.
The result is a supply chain that adapts to avoid penalties. Shih notes that flat panel factories supplying US TV sets remain in China due to heavy subsidies and industrial policy. When tariffs are added, the market finds a way around them, often by shifting where assembly takes place.
Costs will rise
Shih warns that closing borders for specific products drives up prices. When tariffs were placed on steel and aluminium, manufacturers imported construction equipment from other countries to avoid the cost of domestic steel. Later, rules were introduced to tariff goods based on their steel content. Eventually, if all such measures are applied, domestic prices will rise.
He contrasts the current period with the time between 2000 and 2014, when inflation was relatively low partly because consumers could access cheaper imports. The current push to reshore manufacturing through tariffs ignores the reality that consumers benefit from global supply chains. Americans can buy a 50-inch TV for around $300 at Costco because of this efficiency. Removing that efficiency means paying more for those goods.
What it means
For businesses and consumers, the implication is that protectionist policies may not bring manufacturing back but will instead increase costs. Companies will adapt by moving assembly locations or sourcing through different countries to maintain margins. The public will likely see higher prices for electronics and construction materials as firms navigate these new trade rules.
