International Trade Report: US Footwear Tariff Analysis, ECON847

This report analyzes the impact of increased tariffs imposed by the US government on the footwear industry. It examines the effects on various stakeholders including consumers in the importing country, production and non-production footwear workers in both importing and exporting countries, and footwear companies that engage in offshoring or are solely based domestically. The report explores how tariffs act as trade barriers, affecting prices, demand, production, profitability, and employment. It also discusses the US government's decision to impose tariffs, considering economic gains, market efficiency, product scope, and the potential for retaliatory measures from trading partners. The conclusion suggests that the US should not increase tariffs, advocating for alternative control measures and highlighting the importance of economic integration and competition to enhance product quality and foster positive business relations. The report references several academic sources to support its arguments and analysis.

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By (Student’s name)
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International Trade

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Various countries over the world are involved in the exchange of commodities across the
borders through trade agreements. However, there are various policies that a nation may apply to
protect the domestic market. Over the recent past, there have been frequent news reports on the
intention of the United States government to raise tariffs in a number of sectors. The content of
this paper evaluates the impact of the increase on the footwear industry.
Question 1: impact of trade tariffs imposed by a developed country
Impact on the consumers of the importing country: trade tariffs are taxes that are used
as trade barriers. The tax is imposed on both import and export goods but it mostly affects
imports. Over the past years, United States consumers have had access to footwear at an
affordable prices from China and Vietnam. With minimal tariffs, consumers are able to acquire
various types of commodities at affordable prices (Xiong and Beghin 2017). Thus, a raise of
tariffs by United States as a developed country, will have impact on the domestic consumers.
This because a raise on imported foot wears will lead to an increase in the price of imported
footwear. And as we know from the demand and supply laws, when the price of a commodity
increases, the demand decreases. Therefore, these consumers will have to purchase imported
footwear at a higher cost. This will then deny them the opportunity to enjoy cheaply imported
footwear. For that reason, raise of tariffs will affect consumers in a negative manner as the y will
not be able to enjoy variety of products at a lower cost.
Impact on production footwear workers: a raise of tariffs by the United States as the
importing nation will have a positive impact on production footwear workers. The main
objective of tariffs is to create a gap between prices of exported goods and domestically
produced goods. This therefore, means that, the raise of tariffs will increase production and
profitability. This is because, majority of the consumers will resolve to purchase domestic

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products compared to imported footwear. The increased profit will reflect on the wages and
create more opportunities for production footwear workers in the United States.
Impact on production footwear workers in the exporting country: Footwear
exporting nations like china and Vietnam that share a large market share in the United States
footwear market will be impacted negatively. For instance, this will increase the level of
production costs and consequently, there will be a reduction in the profit margins. Reduction of
the margins due to the imposed tariffs will reduce the industrial capacity of footwear companies
in the exporting countries to sustain its human resource. Without alternatives, this will lead to
some employees being laid off to cut of cost by companies so as to enhance revenue. Therefore,
the overall effect of tariffs on the sector will be detrimental on the exporting trade partners
(Acemoglu et.al 2016).
Impact on non-production footwear workers in the importing countries: Due to the
implementation of tariffs, the government will collect more revenue in terms of tariffs on goods
from other countries. This will promote sales among domestic industries. Therefore, non-
production workers will be affected in many ways among them; affordable footwear, increase in
opportunities due to development of the domestic industry. The competition from growth of the
industry will influence the market efficiency and product quality. This will increase the
availability of quality products at affordable prices, therefore, increased sales. Hence, the tariffs
will have a positive influence on the general economic welfare of the non-production workers.
However, there will be inadequate product scope in the market due to the tariffs (Blinder 2019).
Impact on companies that are based in the importing country but undertake
offshoring: Such companies will exhibit mixed implications but will have a stable market share
despite the tariffs compared to foreign industries in the exporting countries. For instance,

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considering the presumed model of labor in offshoring, offshore companies mostly use low-
skilled labor in the offshored investment (Brandt and Morrow 2017). Therefore, most offshore
companies will still have a stable market exploitation possibility in the importing counties since
they can operate without tariffs. Furthermore, the offshore ventures can still generate revenue
from the offshore investments. However, there could also arise the need to focus resources on the
domestic market. This aspect is due to the demand in the footwear industry created in the
domestic market considering China and Vietnam explore a sufficiently larger portion of the
market (Brandt and Morrow 2017). Nevertheless, this would enhance the revenue of the offshore
ventures to develop both domestically and in the offshore ventures.
Impact on Footwear companies that are headquartered in the importing country
and do not engage in offshoring: These companies will enjoy more benefits compared to the
trading counterparts in the exporting nations. However, the ventures with both domestic and
offshore venture will stand a better chance of revenue generation. This is largely attributed to
both offshore and domestic revenue mainstreams unlike the domestic sector (Baldwin 2016).
Domestic countries that do not participate in offshore business will have an opportunity to
enhance their production capacity to meet the gap created in the market. Due to the market, sales
will be guaranteed with the right quality and marketing, therefore, the only role of such
companies will be to meet the production capacity (Brodeur and Asche 2014). This is a
developmental aspect. The companies are also vulnerable to increasing product prices to the
market trends.
Question 2: whether the US government should increase tariffs against imported
footwear:

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The decision by the US government to impose tariffs trading partners will depend on
many factors. Most importantly, the economic analysis of this factor indicates that, the act to
impose tariffs should be significantly based on the economic gains associated to the outcome of
the decision. In this report, the decision will be solely based on the analysis of the paper
regarding the various outcomes. For instance, on imposing tariffs, there will multiple first-hand
outcomes, firstly, the government will collect revenue. Furthermore, the market will also exhibit
low efficiency gain due to availability of a limited range of products and higher prices compared
to the cheaper exports (Blinder 2019).
Since tariffs will work in favor of the domestic producers, there is a tendency of less
competition in the sector exhibited. Despites, domestic countries will also exhibit immense
development due to the market availability of local products. However, on integrating and
removal of tariffs, the revenue collected in terms of tariffs will be dead weight loss to the
country, Furthermore, this will transform efficiency in the market (Pavcnik 2017). The revenue
component will return to the consumer as affordable prices of the footwear products. Moreover,
consumers will benefit from the availability of a diverse scope of footwear in the market. Which
in the first place, is the reason to affordability. The influence from foreign companies will create
the required hype in the domestic firms to enhance product strength to compete favorably in the
diverse markets. The idea will enhance quality availability in the market (Brodeur and Asche
2014).
Therefore, the United States government should not increase the tariffs on the exporting
partners. For instance, other alternative control measures can be implemented. In addition, it is
the economic gain associated with abolished or reduced tariffs on exporting countries. Most
importantly, the efficiency gain, a broad product scope in terms of product choice availability

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and affordable prices are the basis of the decision. Moreover, the introduction of competition in
the market will promote quality (Lindé and Pescatori 2019). This will be introduced by the
strategy by American countries to step up their product quality to meet the market competition.
This will enhance growth of the US companies in a competitive and strong mannerism.
Furthermore, the idea to increase tariffs on other exporting countries is also not advisable
from the perspective of future business relations. For instance, China and Vietnam can also
impose tariffs on US exports to the country. Minimization of tariffs can trigger positive and
economically developmental ties between counties that are trading partners (Yotov, Piermartini,
Monteiro and Larch 2016). Such ties can be associated to development in aspects like human
resources of both countries due to transferable human resource among the countries. The
mobility of the labor factor among the trading partners due to economic integration can lead to
transformation in various economic aspects. Critic of the argument to propose low tariffs in the
footwear industry on the apparent from antagonist point of view, the economic integration is
detrimental on the domestic market and offensive on the United States economic superiority
(Grundke and Moser 2019).
Conclusion
In conclusion, the comparison between trade creation and trade diversion as economic
integration aspects in this document, with the contextual guide of the footwear industry enhances
clarity on the most imminent outcomes of tariffs reduction on trading members. For instance,
adaption of economic integration by the US will be both beneficial on the economy and
economic ties with other countries.

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References.
Acemoglu, D., Autor, D., Dorn, D., Hanson, G.H. and Price, B., 2016. Import competition and
the great US employment sag of the 2000s. Journal of Labor Economics, 34(S1), pp.S141-S198.
Baldwin, R., 2016. The World Trade Organization and the future of multilateralism. Journal of
Economic Perspectives, 30(1), pp.95-116.
Blinder, Alan S., 2019, “The Free-Trade Paradox: The Bad Politics of a Good Idea”, Foreign
Affairs, Vol. 98 (1), 119-128
Brandt, L. and Morrow, P.M., 2017. Tariffs and the Organization of Trade in China. Journal of
International Economics, 104, pp.85-103.
Brodeur, Simon and Ari Van Assche, 2014, “Nike versus New Balance: Trade Policy in a World
of Global Value Chains”, International Journal of Case Studies in Management, 12(4)
Grundke, R. and Moser, C., 2019. Hidden protectionism? Evidence from non-tariff barriers to
trade in the United States. Journal of International Economics, 117, pp.143-157.
Lindé, J. and Pescatori, A., 2019. The macroeconomic effects of trade tariffs: Revisiting the
lerner symmetry result. Journal of International Money and Finance, 104, pp.55-95.

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Pavcnik, N., 2017. The impact of trade on inequality in developing countries (No. w23878).
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Steinberg, J.B., 2019. Brexit and the macroeconomic impact of trade policy uncertainty. Journal
of International Economics, 117, pp.175-195.
Xiong, B. and Beghin, J., 2017. Disentangling demand-enhancing and trade-cost effects of
maximum residue regulations. In Nontariff Measures and International Trade (pp. 105-108).
Yotov, Y.V., Piermartini, R., Monteiro, J.A. and Larch, M., 2016. An advanced guide to trade
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