Question

Make the case against strong protectionist international trade policies (even if you personally agree with them). Who (domestically) is harmed when tariffs are imposed? Explain the mechanism for how tariffs impact those who are harmed. (touch on more than just one group of people)

Answer 1

Protectionism leads to misallocation of resources because it gives support to inefficient producers and sometimes consumers surplus is sacrificed.Protectionism leads to retaliation by other countries and trade wars.Putting such administrative controls might may lead to corruption.Due to lack of competition there might be increased cost of production.Domestic consumers end up paying more as tariffs increase the prices.Imported goods become expensive and inflation increases.Protection to domestic industries continuously make them inefficient and in the long run they become uncompetitive in export market.

Tariffs protect domestic producers but hurts domestic consumers because they pay more prices as tariffs increase the prices of products.

Tariffs could impact US output in a number of ways.There is a possibility that tariffs may be passed to producers and consumers in the form of higher prices.This is because tariffs can increase the prices of materials and parts needed for production and this will in turn increase the prices of goods because the producers will be using those inputs in production.Thus private sector output will decrease.So both producers and consumers are hurt.