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    In Chapter 8 of your International Trade textbook, there is an application of the material on pages 251 - 256 where you are
    to apply what you have learned from this chapter to U.S. tariffs on steel and tires.
    In this application, please provide a detailed step by step account and then make your decision. Consider that the U.S. government did act a certain way but please apply if you would act the same way or differently and explain why in this case study assignment.
    Your case study should be at least 500 words in length. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations.

    © BrainMass Inc. brainmass.com December 24, 2021, 11:56 pm ad1c9bdddf


    SOLUTION This solution is FREE courtesy of BrainMass!

    In accordance with BrainMass standards, this is not a hand in ready case study but is only background help.

    Step 1
    On September 11, 2009, President Obama was requested by the United Steelworkers union to impose a tariff imported from China. This tariff was discriminatory because it meant import tariff only on tires imported from China. Discriminatory tariff was imposed to avoid an all out tariff war that had occurred earlier in case of tariff on steel.

    Step 2
    There were several implications of the discriminatory tariff. Such a tariff violated the most favored nation principle of the WTO and the GATT according to which all members of the WTO should be treated equally. Another important issue was that tire companies did not join in the request for imposing tariffs against China (a). The tire companies refrained from making such a request because these were multinational companies which had operations in China and other countries. These companies did not want tariffs as these had the potential of harming them than helping them.
    The discriminatory tariff triggered a tariff war. China imposed tariffs on products imported from the USA, and the USA imposed more tariffs on products imported from China.

    Step 3
    The paper explains that the deadweight loss from imposing tariff on tires imported from China is higher than deadweight loss from imposing tariffs on all countries. The argument is that since the tariff is imposed on China the imports from other countries continue and even increase. The prices of tires being sold in the USA increase. The tires being imported from other countries also increase and there is a higher deadweight loss. The point is that even through 1,000 jobs were saved because of the tariffs being imposed on Chinese tires, there was a very high economic cost incurred because of the tariff.

    Step 4
    The US government reacted to the request for protection of employment by the workers by imposing a discriminatory tariff on Chinese tires. I would act differently. The rationale is that imposing a tariff on Chinese tires increases the prices of tires. A tariff is a tax imposed on products. These are used to control trade because they increase the price of imported goods making them more expensive to the end users (b). In addition, China can retaliate with its own tariffs. This increases cost for doing business in other industries. For example, China imposed tariffs on chicken feet, auto parts, nylon products, and passenger cars. Imposing tariffs leads to trade wars. When China retaliated, it reduced imports from other industries in the US. Jobs in the tire industry were protected at the cost of jobs in other industries.
    I will instead work on increasing efficiency in the US tire industry. I will make it compete with Chinese tires. I will also encourage and help reduce costs of the tire industry in the US so that locally made tires can compete successfully. If my steps lead to discharge of workers in the tire industry, I will provide re-training of the workers so that they can take up employment either in the tire industry or in other industries (c). My actions will not lead to higher prices of tires. Also, my actions will neither lead to retaliatory action, or higher unemployment. Providing training to displaced workers is far more cost-efficient than imposing discriminatory tariffs on Chinese tires.
    a) Patterson, G. (2015). Discrimination in International Trade, The Policy Issues: 1945-1965. Princeton University Press.
    b) Hillman, A. L. (2013). The political economy of protection. Taylor & Francis.
    c) Blonigen, B. A., Liebman, B. H., Pierce, J. R., & Wilson, W. W. (2013). Are all trade protection policies created equal? empirical evidence for nonequivalent market power effects of tariffs and quotas. Journal of International Economics, 89(2), 369-378.

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