International Trade: Impact of Increasing Tariffs on Footwear Industry

This report examines the multifaceted impacts of increasing tariffs on the footwear industry, focusing on the United States as the importing country. The analysis explores the effects on various stakeholders, including consumers, production workers in both importing and exporting countries, non-production workers, and footwear companies engaged in offshoring and those that are not. The report highlights the potential reduction in consumer well-being due to increased prices, the impact on employment in both countries, and the consequences for companies involved in offshoring. Furthermore, it discusses whether the US should increase tariffs on imported footwear, concluding that the benefits, such as increased employment and government revenue, outweigh the drawbacks. The report emphasizes the need for a balance between promoting local business and maintaining a strong presence in international markets.

Running head: Impact of Increasing Tariffs 1
Impacts of Increasing Tariffs on Importing and Exporting Countries
Name of Student
Name of Institution
Name of Course
Date of Submission

Impact of Increasing Tariffs 2
Question 1
Introduction
The economic stability of a country often depends on the extent to which business
activities are flowing both at local and also at the international level. The ability of a country to
effectively transact business with its neighbors depends on a number of factors which include:
government policies, infrastructure and market availability just to mention but few (Adler, 2017).
In a bid to control the inflow and outflow of goods, the US government has considered
increasing tariffs on footwear. While this strategy may come with a number of benefits
especially to the exporting country, increasing tariffs has a number of setbacks especially on the
consumers and workers in the importing country (Berg and Huebner, 2011). This section
analyzes the impacts of increasing tariffs on both the importing and exporting country with
reference to US as the former subject.
Consumers in importing country
The US government has been a leading importer of footwear having imported over 2
billion pairs in 2018 from countries such as Indonesia, China, Vietnam, Italy and India just
mention but few. The intention to increase tariffs is likely to have impacts on a number of
stakeholders. To begin with, the consumers in the importing country tend to suffer from a
reduction in their well being due to the increased tariffs (Blythe, 2009). The surplus of the
products shall reduce hence leading to increase in prices. Despite the presence of substitute
goods, the consumers in the importing country are still likely to pay more for the same products
which works to their disadvantage in terms of economic wellbeing.

Impact of Increasing Tariffs 3
Production workers in US
Production footwear workers in the importing country are also affected when tariffs are
increased. However, the increase in the tariffs has a corresponding impact on the price of
footwear in the importing country especially in the domestic market. This leads to an increase in
the surplus of the product in the local market hence a gain by the producers (Clemons, 2009).
Furthermore, increasing tariffs which in turn increases product prices result in an increase in the
number of firms. This is because the demand for the locally made footwear is likely to increase.
More firms therefore crop up in a bid to contain the increasing demand for the products in the
local market. With an increase in the establishment of firms in various parts of the country, there
are increased opportunities for employment. This increases the living standards of individuals
working in these firms. The improved return on investment also enhances profits which
culminates into better wages and salaries for the workers.
Production workers in exporting countries
For the production workers in the exporting country, the increased tariffs imply that there
will be reduced need for labor in the exporting country. Consequently, some of the workers may
get laid off especially when they become surplus to requirements. There is a general decrease in
the well being of the workers. The prices are lowered hence reducing the product surplus in the
market (Crecine, 2011). At the same time, the lower prices imply that fewer firms will take part
in the production of footwear in the exporting country. This reduces the general output and hence
an overall increase in cases of unemployment. Increased tariffs therefore induce negative impacts
on the production workers in the exporting country.

Impact of Increasing Tariffs 4
Non-production workers in US
The non-production footwear workers in the importing country may not be overly
affected by the increased tariffs. This is because the decline in imported footwear shall be
replaced by the most appropriate alternative products. The workers can still execute their
responsibilities along this line of production without necessarily feeling the impacts of increased
tariffs.
Offshoring companies in US
The footwear companies that are established in the importing countries and depend on
offshoring shall be negatively affected by the increased tariffs. The increase in the price of the
products at the local level implies a decrease in the price of the same products in the international
market. Due to the fact that the companies depend on offshoring, such business transactions may
not result in much profit. The increased in tariffs equally leads to a corresponding increase in the
cost of production (Dubin, 2010). This becomes a double blow for the companies which depend
on offshoring since the latter process in itself involves a number of formalities and costs.
Increasing tariffs would therefore increase the cost of production for the companies which in turn
reduces the return on investment. The reduced profits equally lower the payment to the workers
which in turn affects their motivation and eventually reduces the overall output.
Non-offshoring countries in US
On the other hand, the companies which are established in the importing country may not
be heavily affected by the increased tariffs. This becomes the case especially when the
organization does not depend on offshoring. An increase in tariffs would increase the prices of
footwear in the importing country. This increases the surplus of the product works to the

Impact of Increasing Tariffs 5
advantage of the companies since they can still gain and expand in the local market. The
challenge would however emanate from an increase in the level of competition since all the local
companies would compete for a share in the rather confined local market.
Question 2
Should the US increase tariffs against imported footwear?
With reference to the responses in question one above, we can deduce the fact that
increasing tariffs on the footwear would have more negative impacts on the exporting country
that it has on the importing country. Due to the fact that the US is the importing country in this
case, it would be a fact worth noting that increasing tariffs on footwear would come with more
benefits than setbacks to the country.
To begin with, increasing the tariffs on footwear would minimize the involvement of
overseas countries due to the increased costs of operations. As a result, more opportunities are
created for the mushrooming of more firms in the United States. This would create employment
opportunities for the local inhabitants while generally increasing the surplus of the products
within the country (Foxall, 2012). Similarly, the citizens are able to receive the products at
relatively lower prices which work to the advantage of the economically unstable individuals in
the society.
The second reason why the government ought to increase tariffs for footwear is because
such a strategy would lead to a general improvement in the output within the organizations. With
increase in prices of footwear due to increased product surplus in the market, the local firms are
able to register better return on investment as a result of higher profits. This in turn implies that
the workers can receive higher wages leading to increased motivation levels. High level of

Impact of Increasing Tariffs 6
motivation in the firms enhances employee commitment to the organizational goals which
improves input.
The local development of footwear production firms due to the increased opportunities
does not only influence the economic well being of individuals attached to these firms but the
society as a whole. In addition to providing employment opportunities, the regions around the
location of the firms are likely to develop in line with transport and communication networks.
Improved infrastructure caused by massive industrialization has positive impacts on a number of
essential aspects in the society.
Increasing the tariffs would not only benefit the consumers and the producers in the US
but the government as well. The consumers are able to access these products due to their ready
availability in the local market. The producers in the importing country equally have an
opportunity to expand their market territories in the local arena. In addition, the government also
benefits from the collection of these tariffs. The amounts received from the tariffs are included in
the government’s list of sources of funding. Increasing the tariffs would therefore mean an
increase in the source of funding for the US. The government can therefore diversify its
economic strategies to establish other sectors hence lead to an overall economic well being in the
society. The living standards of the people are also improved as a result of proper government
funding.

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Conclusion
In conclusion, an increase in the tariffs charged on footwear by the US would come with
various benefits hence the country needs to consider implementing this policy. The step to
increase tariffs would induce positive impacts on the consumers, producers and the US
government as well. However, increasing tariffs on footwear may lead to poor performance by
the US in international trade. While enhancing the local business environment is important,
establishing stable bases in international markets is equally important especially for the country’s
exports. Consequently, there is need to create a healthy balance in a bid to ensure that all the
stakeholders remain on a safe ground.

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References
Adler, N. (2017). International Dimensions of Organizational Behavior. Ohio: South-Western
College Publishing.
Berg, M. and Huebner, B. M. (2011). Reentry and the ties that bind: An examintion of social ties,
employment, and recidivism. Justice Quarterly, 28(2), 382-410.
Blythe, K. (2009). Consumer Behavior. U.K:Thompson Learning.
Clemons, R. (2009). Making Hard Decisions: An Introduction to Decision Analysis. US:
Duxbury Press.
Crecine, J. (2011). A dynamic model of urban structure. Santa Monica:
Santa Monica and Corporation.
Dubin, R. (2010). The World of Work: Industrial Society and Human Relations. Englewood
Cliffs: Palgrave.
Foxall, G. (2012). Understanding Consumer Choice. USA: Palgrave Macmillan.