If the U.S. favors protectionism (e.g. abolishing NAFTA, applying tariffs to imports), how will it impact...

If the U.S. favors protectionism (e.g. abolishing NAFTA, applying tariffs to imports), how will it impact the economy and who will be the winners and losers?

Expert Solution

Ans: Let us suppose the before tariff, US is on efficient point on International trade and supply curve but after applying protectionism US could not able to use the resource wisely. If we see the international trade between the US and the China then, the economy of China is deteriorating day by day. By applying tariff, the US is able to protect the small company but actually decreasing the competition for small firms which further lead to decrease in the quality of goods. Since, US is a big economy and by using trade policy, it affects the interconnected Countries in any way. If we see the recent war tariff between China and US then both countries affected more or less but the China is more affected than the US. Overall welfare of the economy decreases by increasing tariff. The Production of goods in China decreases and production of goods increases in the US to full fill the demands of consumer and Industries. If US is not specialization of particular goods and China is then it would under utilize the resources in the given production. In some cases US is winner but in some cases US is looser, we should see in different context before saying US is winner or not.

Rahul Sunny answered 8 months ago

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