Free Essay Sample - Pros and Cons Tariffs

Tariffs are custom taxes that the government imposes on imported and exported goods (Moffatt, 2019). They are mainly levied to increase imports to protect the domestic industries or increase revenue to the government. Tariffs have a distributive effect such that they are not beneficial to everyone or harmful to everyone. Therefore, some industries gain when the tax is enacted while others lose. The paper will explore the advantages and disadvantages of tariffs among the economies of countries imposing these tariffs and those whose tariffs are imposed on them.

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Pros of Tariffs

Creation of Employment

The enactment of tariffs plays a vital role in protecting local jobs and creating more local industries jobs. By imposing tariffs, cheaper goods from foreign trades are restricted hence promoting and protecting local industries, which leads to the creation of more jobs and reduced or no job losses. In the year 1991 to 2007, United States lost around 3.5 million manufacturing jobs due to the incoming imports from China, and the net effect was 200 000 fewer jobs over this period (Ponnuru & Strain, 2020). This was because there were free trade and no tariffs imposed. However, from the year 1995 to 2011, tariffs were imposed, leading to growth in U.S exports, which led to increased demand for over 6.6 million jobs and 4.1 million services in the manufacturing industry (Ponnuru & Strain, 2020). The import. In the year 2009, 35 percent tariffs were levied on the Chinese government by the Obama government, and these tariffs eventually saved at most 1200 jobs at an annual cost of at least 900, 000 dollars per job (Ponnuru & Strain, 2020).

Correction of Economic Deficit

Enactment of tariffs among the trading countries helps in the correction of economic deficits by strengthening the country's economy. Is because many locals get involved in local industries' activities and manufacture local goods and services. Ig also controls foreign goods and services from entering the local market. More products get produced locally as a result leading to a reduction in the economic deficit. With the $500 trade deficit with China, President Trump mooted that the United ought to cut off the whole trade relationship with China to finish off the deficit, which is majorly caused by the free trade between the United States and China (Ponnuru & Strain, 2020).

Protection of Local Industries

The biggest beneficiaries of trade tariffs are the local industries which are majorly affected by the free trade due to international competitiveness. Trump's tariffs against China have made achievements by ensuring that China treats American companies better and increases its purchases from the American industries (Ponnuru & Strain, 2020). These levying of tariffs. It helps to bring the manufacturing of medicines and other products to reduce the overdependence among countries by promoting local manufacturing.

Prevents Dumping

Imposing of Tariffs helps the imposing countries in the prevention of dumping such that the countries tend to get market and sell their rejected goods to other countries. It happens when the importing country stops being a recipient and now start exporting as well.

Cons of Tariffs

Increased Cost of Production

Due to additional expenses on tariffs, manufacturers impacted by the tariffs likely pass some of the cost to the buyers and intermediaries through increased prices of the resulting products and services. President’s Trump trade policy concerning tax increased costs to both the producers and the consumers, which reduced the variety of products available for purchasing. Another example is the AAP's argument concerning the levy of tariffs on importing books from China. According to AAP and from an economic standpoint, Publishers negatively Impacted by the tariffs would pass on some costs to the booksellers, libraries, and schools. The resulting increase in book prices will end up damaging the independent bookseller's revival and reduce the purchasing power of consumers. It only means that it will hamper the free flow of information and knowledge and information and interfere with the United States (Milliot, 2019).

Tariffs from the imposing countries have also drawn retaliatory tariffs from the affected countries, resulting in more expensive products and services. China is subject to the most extensive set of United States tariff increases, such as U.S section 232 steel and aluminum tariffs and section U.S. 301 in response to unfair trade practices (Regmi, 2019). All the United States’ products and services negatively impacted by the Chinese retaliatory response faced additional retaliatory tariffs. It only means if this cycle continued, the products end up becoming more expensive after every retaliatory tariff. Mexico imposed a 15% tariff on U.S sausage imports, 201% on other pork products, and 25% tariff increase cheese and whiskeys in the year 2018. As a result, Canada imposed a retaliatory tariff of around 10 percent on U.S dairy, beef and poultry products which significantly resulted to the increased cost of production and prices for these products from U.S. Due to this the three countries removed the tariffs and retaliation tariffs after the proposed U.S- Mexico- Canada Agreement (USMCA) in the year 2018 (Regmi, 2019). EU also levied a 25 percent increase tariff on the United States imports of food products. In comparison, Turkey also responded to the United States' 232 tariffs by imposing retaliatory tariffs on selected United States imports while the U.S retaliated by imposing 50 percent on Turkey's importance. However, after the products became very expensive, U.S reduced its tariffs on Turkish steel imports, and Turkey responded by lowering its retaliatory tariff by half (Regmi, 2019).

In short, retaliatory tariffs end up causing more harm since the rise in the cost of production harms the industry and the consumers. The consumers suffer from the accumulated value, which, in return, reduces consumer purchasing power.

Impact on International Relations

The tariffs imposed majorly affect the international and bilateral relations between the trading countries. This is evidenced with the friction caused through retaliatory tariffs until one of the country surrenders or both countries come to ag

Reduced Specialization and Low Production

Imposing hefty tariffs may lead to low production and reduced specialization since it prevents free trade among countries. Countries like China, which enjoy a comparative advantage in producing and manufacturing certain products, find it hard to export these products and services to the tariff-imposing countries. It leads to a shrinking international trade and a decrease in the local firm's market. As this happens, surplus results leading to significant financial losses of the exporting country. The exporting company may also retaliate by imposing higher tariffs on some essential commodities supplied to the other government, which may lead to a lack or shortage of actual products such as medicines. The coronavirus pandemic also revealed the unmasked grudging understanding trade-offs that protectionism through tariffs complicates. Many claims point to dependence on other countries with at least 80 percent of the active ingredients of medicines in the United States coming from China through the crisis. A country like China has a comparative advantage on the production of medical commodities such as face masks and protective gadgets, evidenced by the coronavirus pandemic.

Conclusion

From the text, the pros of the tariffs are way more visible than the cons. Therefore, taxes should continue to be far down the list of most preferred options in any country that wants to redeem its economy. However, many of the pros of tariffs tend to be momentary and also counter-productive such that if one country raises import tariffs, then it usually is a matter of time before the affected government retaliates by increasing its tax, which eventually makes the countries reduce these tariffs ultimately. In as much as protectionism is essential, states should impose reasonable tariffs such that they do not close imports totally from the trading countries for here to be cohesiveness among the economies.

References

Miliot, J. (2019, June 10). Looming Tariffs Cloud Printing Picture. Publishers Weekly. file:///C:/Users/user1/Downloads/ContentServer.asp-4.pdf

Moffatt, M. (2019, July 12). The Economic Effect of Tariffs. Thought Co. https://www.thoughtco.com/the-economic-effect-of-tariffs-1146368

Ponnuru, R. Strain, M, R. (2020, July 6). Trading with the Enemy: Why Tariffs in China aren’t Working. National Review Wine Club. file:///C:/Users/user1/Downloads/ContentServer.asp-3.pdf

Regmi, A. (2019, September 13). Retaliatory Tariffs and U.S Agriculture. Congressional Research Service. file:///C:/Users/user1/Downloads/ContentServer.asp-2.pdf