The United States’ Imposition of Tariff on Chinese Tire Exports

 The United States’ Imposition of Tariff on Chinese Tire Exports

Question: Part One

Which group benefited from the imposition of U.S tariffs on Chinese tire imports? Which group suffered? What does this tell you about duties in general?

The tire manufacturers from Indonesia, Thailand, and Mexico benefited most. As a result of an open market opportunity in the United States, other states such as Thailand, Mexico, and Indonesia utilized the chance to fill in the gap. Furthermore, local production was low; hence consumers’ demand attracted more imports from the other interested states. Despite reduced local production, the domestic manufacturers regained economically after reduced importation from China. However, after the imposition of tariffs on Chinese products, low-income consumers from the U.S suffered inflation on the product. China also suffered an increase in tax on the exported tires. That hiked the production cost of the cheap tires on the Chinese side. That indicates tariffs policies act as barriers to free trade and as a tool for the promotion of local entrepreneurship. The United States’ policy can objectively aim at raising revenues and also reduce trade deficits.

How do you think that the United States would have reacted if the Chinese had raised rates on the importation of certain goods from the United States?

            The United States would revenge and make trading terms much harder. In that case, the United States would introduce more legal but strict policies that would hinder the importation of cheaper products from China. As a result, to address the heightened customers’ demand, the United States requires increasing local production and imports from other states with the capacity to handle the policy. The introduction of new systems by the Chinese over the exportation of U.S products would also lead to the imposition of tariffs by the United States on other products from other trading partners. The U.S would also retaliate by setting up more industries to solve the shortage and local demand from cheaply imported inputs.

What does the rise of tire imports from Thailand, Indonesia, and Mexico during 2010 and 2011, tell you about the value of this kind of trade policy?

The imposition of tariffs on imported goods eliminates the monotonous importation of goods from one state and engages other favorable trading partners. It would also make a country focus on the production of commodities that is good at and at its best quality. That enables more expansion of markets around the globe due to the increase in demand. It also allows free trade from other countries that can manage the endorsed tariffs. That introduces the balance of trade between the international trade partners and nations that imposes the tariffs on certain commodities. Competition from other states would also reduce drastically, hence boost local trade and economy. The policy also promotes local businesses and the increase in local employment.

Do you think that the policy was in the best interest of the United States? Justify your answer.

The United States needed to impose the tariff policy on imported tires from China. That is because the cheap tires from China ruined the local businesses and tire-producing companies. Tighter import policies over Chinese products would trigger competition from other producers around the world; thus, make China engage in the production of more quality tires than before. Furthermore, that would also curb pollution due to cheap and numerous tires that last for short time and adds to the pile of waste in the United States. Probably, the system would have introduced a balance of trade from other international trade partners; hence, acquire better or relatively higher quality products at the same. Therefore, an increase in quantity and quality of products would also moderate prices for low-income earners. That would also favor local manufacturers and entrepreneurs.

Question: Part Two

Do you agree or disagree that the U.S should increase its taxes to Chinese products to reduce its trade deficit? Explain why.

The United States need not increase taxes to Chinese products to address the trade deficit matters. It is much possible to lower trade deficit without necessarily increasing taxes on imported goods from other trade partners, but through engagement into more investment and savings. If the United States’ expenditure and savings exceed the gains from exports, then there is a need for more industrial investment and savings. Gains from trade policies may not be of many benefits and may not fulfill long-term goals to churn trade deficits in the United States. More investment and savings will boost the economy.

Consequently, that will strengthen the dollar making the foreign commodities much cheaper, while the exported products costlier. Such a step can help solve the problem of trade deficit without an increase in taxes. Furthermore, besides trade deficits, such an action will further address other economic hitches such as unemployment, the recession of the economy, strengthen the value of the currency, among other issues in the United States.