Impact of Import Tariffs

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In this video, we discuss some of the most common arguments against international trade. Does trade harm workers by reducing the number of jobs in the U.S.? Is it wrong to trade with countries that use child labor? Is it important to keep a certain number of jobs at home for national security reasons? Can strategic protectionism increase well-being in the U.S.?

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A tariff on an imported product benefits efficient producers and creates government revenue equaling number of units imported times the tariff. However, domestic consumers pay the foreign producer’s nominal selling price increased by the tariff for each imported good.

An import tariff increases employment, revenue and GDP.

Employment increases because of increased jobs created by efficient producers who enter the market after the increase in the domestic selling price of the product.

Revenue increases because of additional units produced domestically and a higher domestic selling price.

GDP increases because of an increase in the number of units produced at a higher domestic selling price. Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in a specific time period.

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Trade increases the number of jobs in the US, it is important to keep a certain number of jobs at home for national security reasons because of international supply chain disruptions, and strategic protectionism hurts well-being in the U.S.

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