3.2 Protectionism

By the end of this unit you should be able to:

Explain, using a tariff diagram, the effects of imposing a tariff on imported goods on different stakeholders, including domestic producers, foreign producers, consumers, and the government.
Explain, using a diagram, the effects of setting a quota on foreign producers on different stakeholders, including domestic producers, foreign producers, consumers, and the government.
Explain, using a diagram, the effects of giving a subsidy to domestic producers on different stakeholders, including domestic producers, foreign producers, consumers, and the government.
Describe administrative barriers that may be used as a means of protection.
Evaluate the effect of different types of trade protection

Trump and Protectionism

Arguments for:
Protectionism is trying to use restrictions such as tariffs to boost your country's industry, and shield it from foreign competition.

Wants to cut the trade deficit with countries like China
The U.S relies too heavily on other countries for certain goods
Hurts U.S manufacturing jobs
Profits will increase for firms in the steel industry
The intention is that they buy cheaper local products instead - boosting your country's economy.
In theory, taxing foreign goods will mean that US companies will buy local goods instead.
Greater demand for domestic goods
Push up the price of domestic goods, which will increase the profit of the domestic producers
Critics point out the US gets most of its steel from Canada and the EU - staunch US allies.

Arguments against:

The burden of an increase in price falls on the consumers
Costs of production increase for firms due to tariffs
Could lead to retaliatory measures by China
Higher tariffs on other firms will also cause an increase in prices for consumersRising political tensions
Industries that rely on imported goods will suffer
Many wealthy countries have shifted from manufacturing economy to a service based economy.
China doesn’t export as many services compared to manufactured goods
China’s retaliation
- They taxed US Agricultural and industrial products
Trade war would hurt consumers
"If other governments around the world pursue the same policies, markets contract and world economic activity is reduced."