Implications of Trade Restrictions in Country X and Y

In an increasingly interconnected global economy, countries often impose trade restrictions to protect domestic industries. However, the economic consequences of these trade restrictions can vary significantly based on the context. Consider the case of Country X and Country Y.

Country X imposes a tariff on imported automobiles from Country Y, which initially leads to an increase in sales of domestic vehicles. However, as a consequence, Country Y retaliates by levying tariffs on products exported from Country X, specifically targeting the agricultural sector. This tit-for-tat policy escalates into a trade war.

Given this scenario, examine how the trade restrictions affect the welfare of consumers and producers in both countries in the long term and identify which of the following statements is most accurate regarding the implications of these trade restrictions.