Question

On March 8, 2018, President Trump used his authority granted under the Trade Expansion Act of 1962 to impose a 25% tariff on steel imports and a 10% tariff on aluminum imports, effective March 28, 2018. Initially, Canada, Mexico, and members of the European Union were exempt from these tariffs, but this exemption was taken away on June 1. Then, on August 1, 2019, the president announced a 10% tariff on $300 billion of Chinese goods effective September 1, 2019, with the possibility of that tariff increasing to 25%. This is on top of a 25% tariff already in place on $200 billion of Chinese goods. Tariffs, or taxes on imported goods, are the most widely used type of trade barrier and are often considered economically inefficient.

Do some research on these tariffs and then address the following:

What official reason was given for the implementation of these tariffs?

Who will receive the most benefit from these tariffs and who will be harmed by them?

Relate these tariffs to the economic principle of comparative advantage and discuss what will happen to production and prices of those products that use steel and aluminum.

Explain why some American companies might be opposed to these tariffs.

What do you think will be the economic consequences of these tariffs, both domestically and globally?

Do you believe the implementation of these tariffs was a good idea? Why or why not?

Answer 1

According to the study we consider the following things :

• There are two main reasons for implementation of tariff by trump : one is he wants to protect his status in terms of value of dollar or to protect from Chinese stake as due to more import of goods from Chinese there will be more export of currency of US so they want to protect their stake. and second is to create US monopoly in terms of high techniques.
• Due to higher imposition of tariff on china, china was badly impacted and also American companies have to suffer loss. And benefits made by other countries especially Taiwan for it's machinery and communication technology and further EU and further goes on like Canada, etc. This is done because of war like status between US and china.
• Comparative advantage is obtained only when one country is specialise in both the category of goods which he is producing. Here in terms of its currency and hi tech. They have competitive advantage firstly but rather it becomes only absolute advantage.
• Due to high tariff production of US falls, it's GDP will fall by 1% point, it losses it's trade deals. Steel is mainly received from from Canada, European nation, Mexico. As president raise tariff it will impact their trade. Production of steel and aluminum falls and also prices are high due to heavy competition.
• American companies opposed tariff because it effects their production and ultimately their profits. Consumer have to pay high charges for the same good that earlier received for less price. So it's demand will reduce also. Ultimately it effects them. And also mainly those companies are more impacted whose business is somehow depends upon steel and aluminum.
• We talk about global impact of tariff it will leads to trade war. As US has signed agreement with WTO not to impose a higher rate of tariff but still it impose. Due to high rates of tariff not only global consequences are there but domestically consequences are also there. Real income of person falls, there is no indirect benefit from the tariff domestically instead of it it would have negative impact. Consumer price index will increases.
• The idea of imposing tarif was not good here. As it negatively impact more. Generally tariff was import to protect the domestic producer from extreme competitions but here domestic producer are badly impacted. All the cost ultimately is fall upon the consumer.