On April 2, 2025 (called “Liberation Day” by US President Donald Trump), the United States announced extensive tariffs on its trading partners. This presented the executives at Caterpillar Inc. with some difficult decisions, as their firm operated around the globe and sourced parts from many countries. Company leaders needed to determine the best location for a new plant while they navigated an unfamiliar international trade environment. Through the perspective of both microeconomic and macroeconomic theory, this case provides the context to analyze tariff policy and firm-level outcomes.

The case bridges partial equilibrium (micro-level) international trade concepts with general equilibrium (macro-level) logic. In particular, it enables students to understand the impacts of tariffs on individual markets and countries as well as the effects of tariffs on exchange rates, policy uncertainty, and inflation. Ultimately, students will utilize economic theory to evaluate the current international trade atmosphere and its influence on corporate decisions.

At the University of Virginia Darden School of Business, this case is the first piece of a two-class series that covers tariffs and the US dollar. For the companion case, see Felipe Saffie and Bryan Harrison, “Dollars, Debt, and Destiny: Marfrig’s Dilemma in a Changing Currency World” (UVA-GEM-0254).