Question

Trade tariffs being levied by the United States against China & vice versa occupy a great deal of the news presently. With your knowledge of economics, you are able to analyze the direct and indirect impacts of tariffs on U.S. commercial enterprises.

Take a position on the tariffs. Choose whether you are in favor of or opposed to the tariffs imposed by the trump administration on Chinese products sold in the United States. Supporting your position by using economic reasoning and where evidence. Speak on any efficiency cost and equity effects that results from the tariffs.

Answer 1

I am against the imposition of tariffs by the Trump administration on Chinese goods. In general, free trade is beneficial for both the trading countries and tariffs act as a significant trade barrier between the two countries. If I think of solely the point of view of the American economy, the imposition of tariffs will have a number of negative effects on the US economy. Firstly, as a reply to America's tariffs, China will also impose similar tariffs which would greatly affect American exporters. Secondly, the tariffs would increase the cost of imported goods in the USA, which will reduce the consumer surplus of US consumers and the tariff will act as a consumption tax on them, which will reduce their disposable income. Thirdly, because of the tariffs, American firms would not be able to get access to various materials at a cheap price from China. This will reduce the efficiency and competitiveness of American firms, reduce output and cut jobs. Fourthly, the tariffs will worsen the diplomatic relationship between the US and China. Such worsening of relationship will affect Chinese investment in the USA in the treatment of China on American firms operating in China.