Question

1. Explain the basic winners and losers from free trade, specific to import markets:

• What groups are likely to oppose foreign trade? Explain.
• What groups are likely to support foreign trade? Explain.
• What are the costs and benefits of foreign trade? Explain.
• What are the arguments for trade protection and are they valid in your opinion (justify your answer).

2. What effect would a tariff on imported goods have on the different groups that you explained above? (i.e., are they hurt or helped)

3. Go to the Tax Foundation Trump Tariffs page (Links to an external site.) and briefly describe two of the tariffs imposed by the current administration.

4. Overall, how does the Tax Foundation predict tariffs will affect unemployment, income and economic growth?

Answer 1

1 - The international trade , specially the import side , brings about the loser from trade and winners from trade.

In the importing country , the consumers are winners because they have to pay less for the imported products in free trade and consumer surplus increases. Producer are losers as domestic production is discouraged as increased imports replace domestic goods.

Hence the producers are likely to oppose it because the producer surplus declines and they have to face competition due to which their demand drops. Consumers are likely to support as they get imported products at cheaper rates .

Cost is the decline in demand for domestic goods , loss to domestic producers and decline in producer surplus. Benefit is the increased variety of goods and consumers surplus increase because of lower cost.

Protectionism is a good way to protect the domestic producers also the outflow of money . It helps the domestic firms to become competitive and face the international competition.