Import Tariffs and Their Impacts on Economies

Paper Info
Page count 2
Word count 645
Read time 3 min
Subject Economics
Type Essay
Language 🇺🇸 US

Introduction

Trade policies have traditionally constituted one of the most debated economic matters, and the question of whether imposed tariffs on imports improve the economy of a nation or not arises cyclically. The recent trade war between the USA and China has fueled the debate, with the proponents of protectionism raising the specter of substantial job losses in favor of antagonist economies and the advocates of the free market providing clear evidence that tariffs on imports affect the economy of a country negatively.

This paper will analyze some key concepts in economics and some of the recent facts following the USA-China crisis. The aim is to show that tariffs imposed on imports will impact the economies of the involved countries on both the macro-economical and microeconomic levels. Tariffs reduce the growth rates, undermine the trust of private investors, increase the costs for raw materials and outsource work, and result in an overall increase in the consumer price.

Main body

Tariffs on imports are protectionist measures implemented by a government to protect the domestic market. Tariffs are similar to sale taxes and correspond to a percentage of the value of the good. Unlike sale taxes, they apply exclusively to foreign products and can differ for different goods. The most immediate goal is to increase the prices of foreign goods to make domestic products more competitive.

From a broader perspective, tariffs are supposed to protect the national labor market: foreign products mean job losses, higher unemployment, and lower wages (Douglas 6). These suppositions mirror a general skepticism towards international trade and anxieties for economic recessions. However, such speculations are not supported by evidence, and seems to manifest cyclically: in the United States, for example, Mexico, India, and China were seen as an economic threat depending on the circumstances, but every time the menaces have proven fallacious (Douglas 2, 6). Generally, economists agree on considering international trade and the reduction of tariffs on imports desirable.

International trade free from barriers improves the quality and the availability of goods, challenges investments and researches, and reduces the price of the consumer through broader competition. Indeed, some groups may experience some losses and disadvantages, but free trade leads to improved welfare in the long run (Douglas 5). On the contrary, protectionist strategies end to harm the economy of the country that imposes them.

Reduced competition does not necessarily result in decreased consumer prices for two main reasons: local producers will adjust the costs of their goods towards the highest values in the market or, in the absence of competition, they will create a cartel to control the market. Tariffs on imports favor some groups but do not have positive income for most of the population within a nation (Douglas 5). Moreover, barriers to imports will affect firms depending on foreign raw materials and companies relying on outsource workforce.

In the recent USA-Chine trade war, the increased prices for steel, aluminum, wood, and other import materials will affect the production costs, and the companies will be forced to raise the prices to ensure their revenues and maintain the workforce. Finally, the nations hit by the tariffs on imports are likely to react by implementing similar policies. Hence the exports of the countries that first imposed barriers on trade will experience a substantial decrease. China, for example, has immediately reacted to the US tariffs by imposing restrictions on some of the essential American exports, including medical equipment and soybeans.

Conclusion

Imposing trade barriers addresses the fear of economic recessions and aims at protecting the domestic market by limiting access to foreign goods. However, both economic theories and empirical evidence show that tariffs on imports impact the nation that imposes them negatively, favoring some categories, reducing competition, and increasing price consumer. Within this scenario, the growth rate slows, with companies forced to bear the increased costs and consumers seeing their purchasing power diminished remarkably.

Work Cited

Douglas, A. Irwin, Free Trade Under Fire: Fourth Edition. 4th ed., Princeton University Press, 2015.

Cite this paper

Reference

EduRaven. (2021, October 19). Import Tariffs and Their Impacts on Economies. Retrieved from https://eduraven.com/import-tariffs-and-their-impacts-on-economies/

Reference

EduRaven. (2021, October 19). Import Tariffs and Their Impacts on Economies. https://eduraven.com/import-tariffs-and-their-impacts-on-economies/

Work Cited

"Import Tariffs and Their Impacts on Economies." EduRaven, 19 Oct. 2021, eduraven.com/import-tariffs-and-their-impacts-on-economies/.

References

EduRaven. (2021) 'Import Tariffs and Their Impacts on Economies'. 19 October.

References

EduRaven. 2021. "Import Tariffs and Their Impacts on Economies." October 19, 2021. https://eduraven.com/import-tariffs-and-their-impacts-on-economies/.

1. EduRaven. "Import Tariffs and Their Impacts on Economies." October 19, 2021. https://eduraven.com/import-tariffs-and-their-impacts-on-economies/.


Bibliography


EduRaven. "Import Tariffs and Their Impacts on Economies." October 19, 2021. https://eduraven.com/import-tariffs-and-their-impacts-on-economies/.

References

EduRaven. 2021. "Import Tariffs and Their Impacts on Economies." October 19, 2021. https://eduraven.com/import-tariffs-and-their-impacts-on-economies/.

1. EduRaven. "Import Tariffs and Their Impacts on Economies." October 19, 2021. https://eduraven.com/import-tariffs-and-their-impacts-on-economies/.


Bibliography


EduRaven. "Import Tariffs and Their Impacts on Economies." October 19, 2021. https://eduraven.com/import-tariffs-and-their-impacts-on-economies/.