Consider the theoretical impact of a trade war, with increased tariffs imposed by all major countries in the world. Suppose that the trade war's main effect is to reduce the benefits of comparative advantage, so that countries no longer specialize in goods as much as before and that therefore the production function shifts down because of the loss of the gains from trade. How is this likely to affect the curves in the IS-LM model? You might begin the analysis by assuming that the trade war affects both imports and exports equally, so that there is no impact on net exports. First, analyze the long-run impact of the trade war in a classical model, assuming that labor supply is not affected. Second, consider the short-run impact in a Keynesian model, in which the tariffs initially cause reduced investment by firms in exporting industries and reduced consumption by consumers facing lower expected future earnings.