Answer to Question #126226 in Microeconomics for Oumou Diallo

Question

The Trump administration has imposed tariffs on a series of goods such as washing machines, solar panels, steel, and aluminum. Wikipedia has a long review of it. (https://en.wikipedia.org/wiki/Trump_tariffs#:~:text=As%20of%20January%202020%2C%20the,all%20U.S.%20imports%20in%202017).&text=Tariffs%20are%20expected%20to%20reduce,by%200.5%20percent%20in%202020) . We learn from our textbook that tariff hurts the economy, at least in the short run. Yet many countries use such a policy in an attempt to protect domestic industries. Some countries actually successfully grow their domestic industry by first protecting it from outside competition. But others fail. Which U.S. industries do you think can benefit from tariff and have a positive effect in the long run, and which will not? And why? Pick one market/industry to discuss.

Answer 1

Steel and aluminum market.

In a strategic industries such as steel and aluminum which is often for military uses, imposition tariffs has beeen used to ensure that United States does not rely on trade for its supply of a good. Section 232 of the Trade Expansion Act of 1962, for example, allows the president to raise tariffs on certain goods for national security reasons. President Trump used this law to raise tariffs on steel and aluminiumsteel from China, as well as from allies including Canada.

Automobiles industry.

One of the biggest areas affected by trade tensions is the US automative industry .Last year China increased the tariffs on U.S.-made automobiles entering the country from 15% to 40% in retaliation to U.S. tariffs. While Chinese consumers mostly buy locally manufactured vehicles, U.S. automakers, like Tesla bear the brunt of trade tensions. The electric automaker first raised the price of its Model S and Model X cars by $20,000 in July after a new round of trade tariffs, and then slashed prices and decided to absorb the difference.