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Trade controls: Tariffs, Subsidies, and Quotas/Flex Exchange

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1. Discuss the following trade controls: Tariffs, subsidies, and quotas. How do these trade controls affect the relationship of trading partners and what is their value in international business.

2. What is a fixed exchange rate and what is a flexible exchange rate? China currently has a fixed exchange rate pegged to the US Dollar. How would a flexible exchange rate help China's global business?

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Solution Summary

This solution discusses the following trade controls: tariffs, subsidies, and quotas and explains how these trade controls affect the relationship of trading partners and their value in international business. It also defines a fixed exchange rate and a flexible exchange rate. It explains how a flexible exchange rate would help China's global business. APA references are included.

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1. Discuss the following trade controls: Tariffs, subsidies, and quotas. How do these trade controls affect the relationship of trading partners and what is their value in international business.

A tariff is a tax on imported goods. Tariffs vary based on the type of item. According to our text, tariffs on blue jeans, small pickup trucks, shoes, and some food items exceed 20 percent. The effect of tariffs on the relationship of trading partners is to reduce competition from foreign producers. It is a negative effect. Tariffs result in a decline of trade because producers are often not able to produce at low enough prices, in addition to the tariff, and still be competitive. The value in international business is low because they do not encourage global trade. The benefit is to domestic producers who can enjoy a larger market and possibly higher margins, as well as the exclusion of competitors who may ...

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Sally Baldwin, Ed.D
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  • BA, University of Southern California
  • MSS, United States Sports Academy
  • Ed.D, Boise State University
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