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The president of the United States decides to impose import duties on steel to protect domestic steel production
The president of the United States decides to impose import duties on steel to protect domestic steel production. The main exporter of steel to the United States, China, reacts negatively and imposes tariffs on both American cars and American bourbon, which the Chinese drink a lot of. Briefly describe the impact of this trade war on the following parties, i.e. who wins, who loses and why:
a) US steelmakers
b) US car manufacturers
c) US car buyers
d) Chinese steelmakers
e) Chinese car manufacturers
f) Chinese bourbon buyers
Expert Solution
Answer:
As per the question,The president of the United States decides to impose import duties on steel to protect domestic steel production. The main exporter of steel to the United States, China, reacts negatively and imposes tariffs on both American cars and American bourbon, which the Chinese drink a lot of.
So,
US imposed import tariff on - steel
China imposed import tariff on - American cars and American bourbon
Chinese drink a lot of American bourbon.
Impact on US steelmakers:
The president of the United States decides to impose import duties on steel to protect domestic steel production. Imposing tariff on steel will help to the domestic steelmakers (US steelmakers) and their competition level will decreased.
Impact on US car manufacturers:
The main exporter of steel to the United States, China, reacts negatively and imposes tariffs on American cars. So, its will negatively affect the sales volume and market size of US car manufacturers. So, US car manufacturers will get affected negatively and it will decrease profits, sales, sales volume and market size of US car manufacturers.
Impact on US car buyers:
Due to imposing tariffs on American cars by China will incraese domestic supply of cars (manufactured in the USA) and the price level of cars will decrease. Due to decraesing prices of car, car buyers will get benefited.
Chinese steelmakers:
The USA is a main importer of Chinese steel or the main exporter of steel for the USA. So, imposing tariff by the US will negatively affect the Chinese steelmakers. So, Chinese steelmakers will get affected negatively and it will decrease profits, sales, sales volume and market size of Chinese steelmakers.
Chinese car manufacturers:
Due to imposing tariff on import of American cars will beneficial for the Chinese car manufacturers. Imposing tariff on the American cars will help to theChinese car manufacturers and their competition level will decreased.
Impact on Chinese bourbon buyers:
The president of the United States decides to impose import duties on steel to protect domestic steel production. The main exporter of steel to the United States, China, reacts negatively and imposes tariffs on both American cars and American bourbon, which the Chinese drink a lot of. So, decreasing supply will increase the prices for bourbon and consumer surplus of Chineses customers will decrease. So, it will negatively affect the Chinese bourbon buyers.
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