Question

What more interesting and/or unusual reasons countries have increased import tariffs. What the situation was that brought about the change in tariffs, if it has been resolved (and if so, how), and what is the efficacy of this type of tariff in changing a trading partner's economic "behavior." Please include a link.

Answer 1

It has been observed that countries are increasing their tariff rates. The trend of increasing tariffs started with the United States and now many nations have increased their tariff rates. The United States increased its tariff rate to resolve the problem of unemployment in the country. Imposition of tariffs on imported goods will decrease the demand for imported goods because the goods will become expensive and increase the demand of domestic goods. Increase in the demand of domestic goods will increase demand of labor and thus increase employment level of the country. Thus, United States had imposed huge tariffs on Chinese goods, mainly, as they were very low cost as compared to domestic goods.

In retaliation to the tariffs imposed on the goods from developing nations by the United States, China and India also increased their tariff rates on the goods imported from the United States.Thus, a cycle of trade war can be seen among the nations.

No, this increase in the tariff rates has not led to solution of the problem of unemployment in the country. rather it has reduced overall world GDP and it is projected by IMF that the world GDP will fall further due to these trade wars reducing economic activity in nations. The other nations are also responding by increasing their tariff rates and this is not the solution of of the problem. It can provide relief in the short run but in the long run, jobs needs to be created rather than increasing tariff rates.