Economics behind Imposition of Tariff on Chinese Goods by the US Report 2022

Running head: ECONOMICS BEHIND IMPOSITION OF TARIFF ON CHINESE GOODS BY
THE US
Economics behind Imposition of Tariff on Chinese Goods by the US
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ECONOMICS BEHIND IMPOSITION OF TARIFF ON CHINESE GOODS BY THE US1
Introduction
Tariff is a tool used to impose tax on import goods by the home country due to various
reasons. The tariff is generally implemented by the government of a country. It is done due
reduce imports of a country and increase sales of products domestically produced. However, in
several cases imposition of tariff has reverted in a negative way. The essay thus studies the
scenario of the economy of the US after its imposition of tariff on the Chinese products. The US
and China trade war is the most impactful trade war in the recent times. The reason behind
imposition of tariff is to improve the condition of the domestic producers in the US. Therefore, it
is evident that there will be both positive and negative effect of the tariff imposed. The essay thus
aims to discuss the pros and cons of the tariff imposition by the US on the Chinese products.
Discussion
The US and China trade war started during 2018 when the President of the US Mr.
Donald Trump announced that in order to improve the economic condition of the country and to
protect the domestic manufacturers the government is going to impose tariff on the goods
imported from China (Javorcik and Narciso 2017). The main notion of imposing tariff on
imported products is that when the imported products are cheaper than same goods that are
domestically produced. Imposition of tariff increases the price of import goods such that the
goods become expensive than the domestic counter parts (Zheng et al. 2018). Due to this, the
customers reduce buying imported goods and increase consumption of domestically produced
goods. Hence, the sales of domestic goods increases and thereby the domestic producers are
better off because with rise in sales of their products, there will be more profit and the size of
domestic producers would increase. There will be more employment in the domestic sector.
Therefore, in the long run, the potential of the country will increase and domestic industries will

ECONOMICS BEHIND IMPOSITION OF TARIFF ON CHINESE GOODS BY THE US2
flourish. However, the question arises whether the same happened for the US after it imposes
tariff on the Chinese products.
In July 2018, the US first started to charge tariff on the goods imported from the China.
Initially, the amount of tariff charged was 10%. Later on, the government of the US increased the
amount drastically to 25% (Reed 2019). It means that the US wanted to stop importing products
from China as much as possible. Many companies are of US origin but manufactures in China
due to the availability of cheap technology and labour. Therefore, with rise in the amount of
tariff the advantage of producing in China and selling in the US has gone. The name of few
companies that manufacture in China are Apple, Audi, Amway, GE, Allergan and many more.
The list of American companies that manufactures in China is almost unending. Thus, the impact
of tariff on these companies have been severe (Liu and Woo 2018). However, the discussion of
disadvantages caused by tariff imposition by the US will be done later. Initially, after the
imposition of tariff on the Chinese goods the demand for domestic counter parts increased.
Therefore, there is good sign of economic improvement in the country. It is argued that the
companies that uses products from China in their manufacturing process will have to purchase
goods from the domestic spare parts manufacturer. The most of the large US companies are
dependent on the Chines products. Therefore, if all these demand return to the home country then
the domestic industries will improve significantly (Hale et al. 2019). It is the major objective of
the policy of imposition of the tariff on the Chinese products. It should be noted that prior to the
decision of the US to impose tariff on the product imported from China, Russia and many
European countries. The US faced sudden fall in it export sector.
The President of the US along with imposition of tariff on the products imported from
China asked all the companies that manufactures in China to shift their production to the US and