Question

If trade war continues with China, what is the impact on US good that competes with Chinese imports, US employment in firms that are in competition against those of Chinese imports, and US corporations' profitability that ships intermediate goods made in China and convert them into finished goods?

Answer 1

-->>impact on US goods that compete with chineese imports :-- Since chineese imports are restricted into usa through tariffs, In the short run, consumption of domestic goods increases even though at relatively higher cost than chineese imports.However, in the long run,as firms adjust, they can produce goods at lower cost.

-->>USA employment in firm's that are in competition with chineese imports :-- as imports reduce due to tariffs, domestic firm's gain advantage of producing more goods by hiring more workers, therby increasing employment in the short run.

-->> USA corporations profitability will get reduced in the short run because,China produces intermediate goods in huge quantities and at relatively cheaper prices,but with import restrictions, domestic firm's in usa may not be able to get these intermediate goods at cheaper prices, therby increasing production costs and therefore profitability reduces.