7303AFE Economics Assignment: Tariff Impact and Trade Disputes

This economics assignment delves into the effects of rising tariff rates, particularly focusing on the steel industry within the American economy and the trade disputes between the USA and China. It examines how tariffs impact consumer prices, producer incentives, and employment within the steel sector. The assignment further explores the retaliatory measures taken by China and the USA, analyzing the consequences on their respective economies, including impacts on import costs, productivity, and trade revenues. The paper then outlines the rationales behind protectionist policies, such as market protection, export growth, and trade deficit reduction. Finally, it addresses the serious threats posed by the trade dispute between the USA and China to the international economy, highlighting the negative impacts on global industries, especially technology and mining, which are heavily reliant on trade between these two major economic powers.

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the Student
Name of the University
Author Note

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Table of Contents
Answer to question 1: Impact of rising tariff rate on steel in the American economy....................2
Answer to question 2: Effect of protectionist policy measured by the USA and China.................2
Answer to question 3: Rationales behind the protectionism policy................................................3
Answer to question 4: Trade dispute between China and the USA owns serious threat.................3

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Answer to question 1: Impact of rising tariff rate on steel in the American welfare economy
As per the study, the imposition of tariff fails to improve the welfare condition of the
American economy. In response to a trade war with China, the federal government of America
has decided to raise the import tariff rate on the Chinese products including Steel. In this way,
the price of the steel has been aggravated over the last few years. The steel product has been
turned to be very expensive for the American consumers (Cooper, 2014). The cumulative
demand of the product has been declined. Therefore, the steel producers no longer feel
encouraged to increase the production level within the country. Following the contraction in the
supply level, the employability growth related to the steel sector gets seriously hampered. This
generates limitation of the consumer choices. The consumers become unable to purchase the
steel product owing to the exorbitant price charged on the final products made of steel (Irwin,
2017). In contrast, the small and medium sized manufactures successfully draw benefit from the
rising tariff rate. The hike in tariff rate protects the producers from the excessive competitiveness
of the on international market. They are expected to gain a sizable revenue during the course of
high tariff rate.
Answer to question 2: Effect of protectionist policy measured by the USA and China
In response to the American tariff policy, China has decided to hike the import tariff rate
on the commercial aircraft and automobile products manufactured in the USA. The hike in tariff
rate aggravates the import cost increasing the purchasing cost in case of the Chinese buyers.
Meanwhile, the USA also has taken retaliatory actions in order to face the challenges
related to the Chinese economy. The USA is labeled as a significant steel and copper importer in
the Chinese industry (Handley & Limão, 2017). The increasing import tariff rate on the Chinese

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goods has resulted in the contraction of the productivity in addition to the employability of metal
industry in China. Further, the serious allegation by the USA against China’s trade policy
regarding misuse of technological know-how leads to lowering the import revenue of China. As
a result, the import of the Chinese electronic gadgets including the cell phones and computers
has been going down over the couple of years.
Answer to question 3: Rationales behind the protectionism policy
The economy adopts the protectionism policy owing to the following reasons.
1. On the account of volatile market structure, the policy is highly recommendable to protect the
domestic market. The domestic producers feel extreme pressure due to the excessive
competitiveness related to the international market. Following the protectionism policy, the
domestic producers are expected to obtain competitive advantages (Guo et al., 2018).
Meanwhile, the employability is seemed to be improved within a country due to increase in the
aggregate production level.
2. The economy exercises import tariff policy as a part of the protectionism strategy to intensify
the export growth. This results in the enhancement of the country’s gross domestic production
level. The policy rejuvenates the financial structure of the local manufacture associated with the
export sector.
3. Consequently, this strategy is expected to ameliorate the trade deficit level and therefore, the
country’s balance of trade gets improved (Pierce & Schott, 2016). The earnings from the sector
surges due to the absence of the international competitors related to the import sector.

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Answer to question 4: Trade dispute between China and the USA owns serious threat to
the international economy
Referring to the regional trade strife, the global business is seemed to have detrimental
impact. The existing trade dispute between China and the USA has lowered the pace of growth
of some goods and services which production level closely depends on the commercial decision
of those two countries (Awan, 2016). The USA is considered as a large importer of the Chinese
electronics and gadgets. The imposition of tariff has made theses technical products expensive in
the USA as tariff raises the import cost for the sellers. As a consequence of that, the demand for
the goods has declined, resulting in that, the global technology industry has received a
demoralized impact. On the other hand, the sizable revenue of the Chinese mining industry
depends on the American importers. The recent hike in import tariff rate by the USA has seized
the productivity of the international mining sector. In addition to the steel industry, the copper
industry has been unable to receive fair price rate due to this emerging trade strife.

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References
Awan, A. G. (2016). Wave of Anti-Globalization and Capitalism and its impact on World
Economy. Global Journal of Management and Social Sciences, 2(4), 1-21.
Cooper, W. H. (2014). Free trade agreements: Impact on US trade and implications for US trade
policy.
Guo, M., Lu, L., Sheng, L., & Yu, M. (2018). The Day After Tomorrow: Evaluating the Burden
of Trump's Trade War. Asian Economic Papers, 17(1), 101-120.
Handley, K., & Limão, N. (2017). Policy uncertainty, trade, and welfare: Theory and evidence
for china and the united states. American Economic Review, 107(9), 2731-83.
Irwin, D. A. (2017). The false promise of protectionism: why Trump's trade policy could
backfire. Foreign Aff., 96, 45.
Pierce, J. R., & Schott, P. K. (2016). Trade liberalization and mortality: Evidence from US
counties (No. w22849). National Bureau of Economic Research.