Economic Tariffs are the restrictions which are imposed by one country on the import of goods and services from another country in the form of increased duties, taxes in order to discourage them and increase the production of such a product in their own country. It is usually placed on imports.

Recently, in the month of June 2018, the USA had imposed tariffs of 25% on imports on over 1000 products worth $50Billion from China to the USA.

China fought back with $50 billion of imports from the USA to China.

The USA, the largest economy in the world couldn’t be moved by the whims and fancies of the Chinese and hence, threatened to impose an additional 10% tariff on $200 Billion of Chinese Goods.

Now, what does this imply? It means that for an American Consumer who used to buy a product, say Soya Bean imported from China for $100 earlier would now have to shell out $125 for the same product.

Effects

  • This would reduce the demand for the product and would affect the producer more than the consumer because now the USA would now import from another company where it can get this product cheaper than China.
  • But, in many circumstances, this is not the case. Sometimes, the American Companies which are importing the raw material for their products from China cannot get their product anywhere else cheaper or of the same quality and ultimately incur losses.
  • Steel and Aluminium prices in the USA have risen by 40% since March.
  • Global Markets had fallen due to negative sentiments.
  • The Dow fell by over 1%, Hang Seng(Hongkong Stock Exchange) by over 5% and SHCOOMP(Chinese Stock Index) fell by 2% approximately. The Barometer of the Indian stock market, the Sensex also fell by 0.37%. Shares of Boeing and Fed-ex have also affected adversely.

Benefits for the USA

  • Boosting production in own country.
  • Reducing overall cost to the consumer (though this would not always be the case)
  • Reducing the amount of trade deficit. (Exports-Imports) (The USA has a trade deficit of over $330Billion dollar with China).
  • Establishing Supremacy by being the stronger economy here.

Opinion

It would adversely affect Consumers, in America and worldwide as the overall cost of producing goods would increase as Apple produces both in USA and China, Walmart imports from China, and further imports it to other countries from there. Now, this is a major attempt to disrupt Mr. Xi’s Made in China plan of 2025, a plan to make China a world-class producer.

The reason why the USA has launched it is because of Poor Intellectual Property Rights Protection by China, in which it requires companies investing in China to transfer their technology.

This step by the USA clearly shows that they are not the one to be messed with and clearly respond back with strong tariffs. The Chinese have also hit back with tariffs while India is also proposing to fight back with tariffs on the USA. This trade war throughout the world clearly affects many, including the US workers, companies and even consumers… will these measures making America great?

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