Question

2021 estimates suggest that the “Chinese Trade War” will ultimately result in tariff increases averaging 28 percent in U.S. markets. Assuming these estimates are correct:

A. Would you expect the average price of imported good from China to increase prices by 38 percent in U.S domestic markets that rely on these imported goods to produce final goods and services (for example, tariffs on steel)? Explain. (A supply and demand graph maybe be helpful.)

B. How would you expect the “Chinese Trade War” tariffs to affect workers in U.S. domestic markets affected by these tariffs?

Answer 1

Solution A

Since US doesn't have competitive advantage in production of steel the US does import steel at cheapest prices from China known for dumping. Now due to tarriffs the prices of steel impkrted will increase and as results final products like Automotive cars will get costlier as 30 percent tarriff always adds on to atleast 30 percent hike in rates of final product.

PAGE NO.: DATE: 1 PRICES QUANTITY Tax BABC = Total Excess Burden of & Producer & Consumer Congratulations. Take pride. You are using a Navnost ecobuddyproduct. Teacher's Signature

Solution B

Trade war tarriff will cause higher additional costs for firms and hence imports will get drastically reduced such that domestic firms will start in house production and thus scalability will ramp up creating need for additional US workers and thus unemployment will decrease.