Understanding the Impact of Imposing Tariffs on Chinese Imports: International Economics Analysis

Running head: INTERNATIONAL ECONOMICS
International economics
Name of the student
Name of the university
Author note

INTERNATIONAL ECONOMICS
Link to the article: https://www.cnbc.com/2018/08/01/us-china-trade-war-trump-to-propose-
25percent-tariff-on-chinese-imports.html
Description of the article
The above article states that a tariff have been imposed on the Chinese goods of worth
$200 billion which have increased from 10 percent to 25 percent. There had been trade war
between us and China for a long time. . Although initially, the tariff had been ten percent.
The tariff have been imposed especially on steel and on soybeans (CNBC. 2019). The
Chinese government although did not take any immediate actions against the government of
the United States. The tariff that is imposed by the USA can be advantageous to the domestic
steel producers since it will be helping them to increase their production. The trade
protectionism will be having a negative effect on the exporting countries. The trade
protectionism is known to be the type of policy which is known to limit the unfair
competition. However, it will be destructive in the case of the long term. Tariffs are known to
make the country as well as the industries less competitive in international trade.

Q1 Q4 Q Q3 Q2
P2
S
D
Quantity
P1
P
1 2 43
World supply + tariff
25%
INTERNATIONAL ECONOMICS
Figure 1 Effects of Tariff
When the United States of America is known to impose 10 percent tariff on the
Chinese goods, the price of the goods rises. In this case P1 is the initial price which the
Chinese producers in this case China is producing steel at the world market price P1 where it
is the initial world supply. After the imposition of tax the price have known to rise to P2 and
the new output will be at Q3. After the imposition of tariff, the imports fall to Q4 to Q3. The
domestic producers have known to protect from the cheaper imports from the rest of the
World. As a result of tariff, the domestic consumers are known to face higher prices and they
are known to suffer a loss of consumer surplus. The domestic producers are also known to
increase their producer surplus since they receive higher price. However, it have been found
out that the reduction in the consumer surplus have been greater than the rise in the producer
surplus. The tariff revenue is 1+2. The net welfare loss is 3 and 4. The welfare loss also
termed as excess burden is a loss of economic efficiency which takes place when equilibrium
for a good or service is not achieved.
The trade protectionism will be having negative effect on the exporting countries. The
trade protectionism is known to be the type of policy which is known to limit the unfair
competition. However, it will be destructive in case of long term. Tariffs are known to make