International Trade and Finance

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When it comes to how tariffs affect consumers and producers, who wins and who loses? This video will show you how to analyze international trade using supply and demand and will then use this same framework to demonstrate the welfare costs of tariffs. At its core, a tariff is a tax on imports. This leads domestic consumption to fall, and domestic production to increase. Ultimately, tariffs lead to a waste of resources by diverting production from low-cost (world) producers to high-cost (domestic) producers.

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The first two parts of the video reinforce the Impact of Import Tariffs.

Click on the following link to retrieve the article “Impact of Import Tariffs”.

https://meditationsoncatholicism.blog/2020/05/26/impact-of-import-tariffs/

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The third part of the video covers Welfare Costs of Tariffs.

Tariffs increase prices to consumers, so domestic consumption falls, and this creates a deadweight loss.

Tariffs divert production from low-cost world producers to high-cost domestic producers and waste resources.

Tariffs are bad for consumers and good for domestic producers, but the net effect is negative, because of deadweight loss in demand and wasted resources in domestic supply.

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The third part of the video mentions “Opportunity Cost”. The opportunity cost of land in Florida, would be, for example to produce oranges instead of sugar.

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The US doesn’t like that China is growing so fast and set to overtake America as the biggest economy in the world if it hasn’t already by certain measures. Basically China and the US are caught in this race of imposing tariffs on each other so the US slaps a high tariff on certain products then China retaliates.

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