Tariffs and Trade: Impact on Developed and Developing Economies

This assignment examines the impact of tariffs imposed by developed countries on developing countries, using the example of the US tariffs on steel and aluminum imports from India. It analyzes how these tariffs, although seemingly targeted, indirectly affect the Indian market and steel manufacturers. The assignment further explores the differences in the application of tariffs and non-tariff barriers between developed and developing countries, highlighting how both types of measures ultimately restrict trade and hinder economic efficiency. It concludes by emphasizing the negative impact of such trade barriers on the global trading system and the importance of organizations like the WTO in mitigating these effects and promoting free trade.

Reply to the questions posed by teacher (marked in red)
A developed country (USA) levied tariffs to the extent of 25% on steel and10% on
aluminium being imported from developing country (India) (Suneja, 2019). The impact of
these tariffs on the local steel and aluminium industry has not been significant considering
that India is a huge domestic market and presently exposure to US is quite limited. There are
only limited Indian manufacturers of steel that had any some exposure to USA. The impact
has been indirect on the industry since there has been a drop in –prices owing to the higher
supply which the quantity that was exported earlier to US has to be now absorbed locally
(PTI, 2018).
With regards to application of barriers, developed countries typically apply non-tariff barriers
especially related to quality. On the contrary, developing countries tend to apply tariffs so as
to extent protection for local industry or anti-dumping duty in certain cases. The underlying
intention of both the strategies is similar as these measures effectively limit competition. But
since the developed country cannot claim protection from imports, hence not meeting the
quality or environment standards are often cited as the reason for rejection.
According to me, impact of tariff and non-tariff measures is highly negative on the global
trading system. This is because it erects barriers and thereby allow the inefficient producers
to continue wasteful usage of scarce resources aided by tariff related protection. This tends to
restrict trade and the associated gains which countries can reap from competitive advantage
of their global peers. As a result, organizations such as WTO have been formed.
References
Suneja, K. (2019), India, US talk restoration of GSP, withdrawal of tariffs, Retrieved from
https://economictimes.indiatimes.com/news/economy/foreign-trade/india-us-talk-
restoration-of-gsp-withdrawal-of-tariffs/articleshow/71071029.cms?from=mdr
PTI (2018), US tariff on steel import may indirectly affect India: Minister, Retrieved from
https://economictimes.indiatimes.com/industry/indl-goods/svs/steel/us-tariff-on-steel-
import-may-indirectly-affect-india-minister/articleshow/64978250.cms