Question

In: Finance

How would you respond to an argument to impose a tariff on imports arriving from a...

How would you respond to an argument to impose a tariff on imports arriving from a particular country in order to improve the balance of trade with that particular country?  Do the criticisms of the tariff to improve the overall trade balance with all partners apply in this bilateral context?  Why or why not?  Are there additional considerations to be taken into account?  Explain.  

I need a clear explanation for this question. Thanks so much!

Solutions

Expert Solution

Balance of trade

  • BOT include export and import of a particular country during a period of time with the rest of the world
  • BOT surplus =Cost of country's Export>Cost of a country's import and deficit =import>export
  • It is better to keep a keep BOT surplus for a particular country
  • Initially, a trade deficit is not necessarily a bad thing (it can raise country's standard of living and reduce the threat of inflation)
  • But over time a trade deficit can cause more outsourcing jobs to other countries, may make weaken domestic industries, increase unemployment , huge reliance on imports also leave a country vulnerable economic downturns, currency devaluation
  • So if we can to improve our trade deficit through imposing of tariff on imports
  • But according to some economics is criticizing imposing restriction on imports in international trade
  • They argue that trade barriers will cause to increase the price of the product and service and reducing the available quantity of particular product, which result in lower-income and reduce employment and lower economic output, and finally affect economic growth
  • And also promoting low quality and goods and service produced within the country
  • Alternative way or additional consideration we can take into account are;consume less and save more and depreciate the exchange rate

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