Question

Trump tariff of 2018 and the concept of spillover and their impact on resourcre allocation and the corrective action needed.(by government or private sector)

Answer 1

Generally, we can see there are two types of market failure. One is too much or too little amount of goods produced by the market system. And the second problem is market does not produce anything. Here the first problem arises because of spillover and second one because of democracy problem. Here we can see two kinds of issues on spillover effect. One is spillover cost when an individual takes the production or consumptions incurred costs and the individual or firm cannot compensate these costs. This is what we called negative externalities. The government or market solves these negative externalities by using the prohibition or restrictions. Another way to correct a negative externality taxation of the government.

We know that trump tariff means that there is a series of tariff imposed by Donald Trump. Now there is two-phase of tariff one in January for on panels and washing machines and another one in March on aluminum and steel. Most of the economists argued that these policies have little or no impact on the US economy. The spillover effect means that there are unrelated events in one nation can have on the economies of other nations. The policy implements in the US because they believe that the trade will cut the US employment in the steel industry. But the economists argued that the trade will not cut jobs in metal industries. Generally, the tariff is against the Chinese product those who are the largest producer of steel and metals.