President Trump’s plans for tariffs on about $60 billion of Chinese imports have rattled equity markets. Investors should begin to study which types of industries, countries and companies could win or lose if an all-out trade war erupts.

Since his election campaign, President Trump has promised voters to take tough action against China to protect US industry. While we don’t take a political stand on the decision, we, as equity investors, must assess the potential impact of what may become a defining policy move of the administration.

Tactical Posturing or War Footing?

Nobody knows exactly how things will unfold. The tariffs announced today might be a shrewd tactical move aimed at squeezing concessions out of China. Some measures could be temporary. And China might bow to the pressure and be more accommodative to US demands than expected.

But what if things get out of control? If the US decides to push China hard and China retaliates with equal force, the impact would be widespread. On a macroeconomic level, this scenario would probably trigger a slowdown of economic growth in both the US and China. But for companies and stocks, the effects would be much trickier to predict.

Shifting Trade Relationships

New trade barriers could spur a shift in traditional trading relationships. China would be likely to rethink its trade alliances in the region and get closer to partners in Southeast Asia, Latin America and the European Union (EU). In particular, China would seek new sources for products that it currently imports heavily from the US. Examples include aircraft and parts; pork, which is in plentiful supply across parts of Latin America and Asia; and soybeans (Display).

The US imports a wide variety of products from China (Display). A dramatic shift in the trading relationship would have the potential to redraw the supply chains that have become the backbone of the global technology industry—and vital for US manufacturers. For example, consider Apple’s manufacturing of the iPhone in China. Many components are produced in China by South Korean and Taiwanese companies, which could transport their operations elsewhere in the region.