Question

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 imposition of tariff will discourage the foreign producers. Thus the foreign import will become more expensive. This will reduce the number of choices of goods and also have a lower quality of consumers. This will improve the competition in the domestic country. And also protect the domestic countries from international competition. This will reduce the total supply and also increase the level of prices. This will reduce the choice of the consumers. So consumer either to buy less imported goods or less of some other goods. This will reduce the purchasing power of the consumers. So consumers are willing to pay high price with lower choices.
2) The major tariff imposed on automobiles and all Mexican imports.
* Automobiles: Trump imposed 35 percent tariff on every car, truck and especially Mexico Ford. This imposed on the basis of the national security threat over US economy.
* All Mexican imports: Imposition of tax by 5 percent on all imports from Mexico. The imposition of tax mainly due to the strong measures to curb immigration across the border.  
3) The rise in tariff rates raises the price level and diverts the resources from efficient economic activities to low efficient activities. This reduces the purchasing power of the consumer. This tariff increases the cost of intermediary goods. Reduce the income level of low income group people. The potential price increase on US consumers. The high value dollar makes it difficult to export the goods in global market. This will lower the total output and income of both workers and capital owners. It will leads to the reduction of incentives for work and investment.