Question

Glenwood Laboratories Canada Ltd: Coping with Tariff War

1(a). Why did the United States impose aluminium tariffs? Why did Canada retaliate with cylinder tariffs? (8.0)

(b).What other options might exist for Glenwood? Explain clearly. (4.0)

Answer 1

1.

A

USA imposed aluminium tariffs because USA wanted to correct trade deficit that was increasing due to huge quantity of imports of raw aluminium coming to the USA. It could happen as tariff will reduce the imports and trade deficit position could improve. Besides, Trump administration thought to renegotiate the trade deals with the countries Canada, Mexico, EU and many others to get benefits out of it. It led to the putting in tariff upon aluminium along with the many other products. The argument was also given to support the domestic industries whose were unable to compete with the imported aluminium.

Canada retaliated with cylinder tariff, because it wanted to nullify the one sided import tariff applied by the USA in order to improve their trade deficit condition. By putting tariff on cylinders, the export from the USA to the country of Canada will decrease and any gains to the USA by import tariff will be nullified with a decrease in exports.  So, Canada took retaliation measures.

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B.

Glenwood company were importing Oxygen cylinders, made of aluminium, from the USA. In the wake of trade war, the company can negotiate trade deals with those companies who were operating outside of the USA and could offer the similar rates for import. In this regard, the company can approach producers in Mexico such as ALFA group to have a trade deal to import the aluminium cylinders. Besides, there are many MNCs operating in the USA, having a presence in the other countries such as China, Brazil and or EU. From these manufacturing setups, the aluminium cylinders can be supplied to the Glenwood company and cater the import needs. So, trade can take place from the alternative production setups in different countries.