If I were to have FUE and use my chest hair as the donor site, what would be the damage to donor site? (e.g. scarring)

Sometimes there can be small white dots after FUE performed on the chest.  It varies per patient and can be more noticeable in patients with darker colored skin. It also depends on the size punch and depth of punch used by the surgeon.  Obviously the bigger the punch and the deeper the extraction, the more likelihood of scarring.

Every patient heals differently.  If you shave your chest, you will see and may feel hundreds of small white dot scars.

Not an issue at all-  we on average perform 1-2 chest or beard hair FUE to the scalp, and have to my entire knowledge not had any problems with scarring.  Now obviously because these hairs were removed and placed into the scalp, there will be a loss of hair density but this is usually not a bad tradeoff for patients

I assume you are asking because you have exhausted the scalp as a source of hair? The chest can be used but the scalp is best by a long distance due to hair quality and rate of growth and success.You will have tiny dot scars on your chest the visibility of which  varies from person to person. Some people are more prone to prominent scars and if you are darker skin or a tan, then the White scars may show more. It is generally accepted that it's best to avoid the skin over the sternum as healing is not as good there

Fortunately, this does not scar much so as a source for hair grafts from a scarring perspective, it is a good option; however, body hair does not grow beyond 6 months and then it falls out and goee into a rest phase for 4-6 more months when you don't see any hair at all. That is not like scalp hair which has a 3 year growth cycle and a 3-6 month rest cycle. Think FUE of scalp hair not body hair,