New Delhi, Aug. 19 -- The global economy is dominated by an intricate web of supply chains that move products almost seamlessly across national boundaries. This system has served the world well for more than three decades, but is now under attack. The disruptions during the pandemic were an advance warning. The escalating tariffs imposed by US President Donald Trump on his country's important trade partners is now upending that system.

Much of the attention right now is focussed on the macroeconomic effects of the trade shock, or what the higher tariffs could do to the world trading system, economic growth, job creation and inflation. However, if the world economy eventually settles into a new equilibrium with more protectionism-as it li...