Economics Assignment: Analysis of Trade Policies and Economics

This economics assignment analyzes the impact of trade policies, specifically focusing on the effects of Canada's dairy import restrictions, the economic consequences of mass deportations in the United States, and the welfare implications of tariffs. The assignment examines how NAFTA revisions affect consumers and producers, the impact of deportation on labor markets and GDP, and the effects of tariffs on both importing and exporting countries. It explores consumer and producer welfare changes, the role of government revenue, and the potential for compensation mechanisms like tax cuts to mitigate negative impacts. The assignment uses diagrams to illustrate the effects of tariffs and provides a comprehensive analysis of these complex economic issues, including a discussion of how government interventions can alter the outcomes.

Running head: ECONOMICS ASSIGNMENT
Economics assignment
Name of the student
Name of the university
Author note

World supply
World supply
plus tariff
Q1 Q2 Q3 Q4
Pt
P
ECONOMICS ASSIGNMENT
Answer 1)
The problem states that Canada limits the imports of the dairy products so that it is not
more than 10% of the domestic consumption. The main goal of the NAFTA is to remove
barriers among United States, Mexico and Canada. The revised version of NAFTA states that
the imports will rise to higher levels of the domestic consumption. When more imports will
be allowed, the consumers will be gaining as they will be provided with more variety of dairy
products. As a result of higher imported goods, consumers will be gaining more. The answer
is uncertain because though with the increase in the dairy imports, the consumer may gain
due to the elimination of trade barriers, the domestic producers may suffer a loss
Answer 2)
Huge amount of deportation in the United States are generally costly and will hurt the
economy. When the immigrants are sent away, the employers need to hire new people in
place of them. When the immigrants will be removed, it will lead to decrease in the labor
force and the Mexican GDP will decrease and will get cut by $1.6 trillion. In general, when
migration increases, the wage will decrease. So, when the immigrants are removed the wage
for workers in Mexico will increase. This will also lead to increase in the income of the
employers. Due to deportation (a) the wages for the workers of Mexico will increase. (b)
income of the employers might also increase. (C) the Mexican GDP will decrease and will
get cut by $1.6 trillion.
Answer 3)
Figure 1 Impact of tariffs on importing countries

Q1 Q2
s D
Pt
p
P2
ECONOMICS ASSIGNMENT
Answer a)
The above diagram of tariff shows that the United States is the importing country who
was importing steel from China. The tariff will be affecting both welfare of the consumers
and producers.
Consumers welfare: the consumers of the United States will be suffering a reduction
in the well fare of the tariff. The rise in the price of the imported goods will reduce the
consumer surplus.
Welfare of the producers: There will be increase in the welfare for the producers of
the United States as a result of tariff. The rise in the price of the imported products will lead
to increase to in the producer surplus. The increase in price will also lead to increase in the
output with rise in employment.
Answer b)
When the government of the United States will be using the revenue of the tariff for
creating the compensation of the consumer by which will be giving back the revenues to the
consumer in the form of check, the answer (a) will change. Then in that case the welfare of
the consumers will not get reduced. When the government will be paying back the tariff
revenue to the consumers in the form of check, the consumers can then use the money for
paying the expensive imported goods.
Answer c)
Figure 2 Impact of tariff on exporting countries

ECONOMICS ASSIGNMENT
Welfare of the consumers: the above diagram shows the effects of tariff on both the welfare
of the consumers and suppliers. The consumers of China will be experiencing an increase in
the welfare as result of tariff. Due to the decrease in the domestic price, the consumer surplus
gets increased.
Welfare of the producers: as a result of tariff the producers of the exporting country which is
China, will be experiencing a loss in the welfare. The decrease in the price of the product in
the market will lead to decrease in the producer surplus in the industry. The reduction in price
will also lead to decrease in the output and also lead to decrease in employment.
Answer d)
In this case when the Chinese government will be cutting taxes for compensating the
Chinese producers who was hurt by the US tariffs, the producers of china will be producing
steel more in domestic markets and will reduce the export in the United States. When the
governments will be cutting taxes , the consumers will also be gaining as the prices of the
domestic products will go down.

ECONOMICS ASSIGNMENT
Reference list
Caliendo, L., & Parro, F. (2015). Estimates of the Trade and Welfare Effects of NAFTA. The
Review of Economic Studies, 82(1), 1-44.
Li, Y., & Beghin, J. C. (2017). Protectionism indices for non-tariff measures: An application
to maximum residue levels. In Nontariff Measures and International Trade (pp. 167-
178).
Villareal, M., & Fergusson, I. F. (2017). The North American Free Trade Agreement
(NAFTA).
Why mass deportations are costly and hurt the economy. (2018). Retrieved from
https://theconversation.com/why-mass-deportations-are-costly-and-hurt-the-economy-
73504