The Effects of Tariffs on Imports, Essay Example

The application of a tariff on Chine tires by the U.S. government affected trade between the two countries. The tariff applies an increased charge on tax on the tires at the point of importation. This creates an increase in cost for importers, forcing them to raise their prices, thus reducing their demand as per the forces of demand in the market. This would increase demand for locally manufactured tires as they would be a cheaper alternative. This policy has a huge advantages and consequences to all stakeholders involved.

International Relations

The U.S. foreign policy outlines the manner in which the United States relates to other nations. It defines and prescribes the format and scope of relation with other countries. Trade is a considerable element in international relations as it defines how two countries can coexist while ensuring mutual economic growth. This tariff would strain already weak U.S.-China relations. This may raise global political temperatures.

Economic Giant

China is a considerable global trader and holds a considerable amount of assets globally. The Chines economy has growing influence in other growing economies, especially in Africa. Applying the tariff on Chinese produced tires may aggravate China and lead to a series of economic strategies that amount to economic warfare between China and the United States. This may not be in the best interest of the United States considering the economic power of China.

Increased Prices

Applying a tariff on Chinese-produced tires has the effect of increasing the prices of tires in the market. Chinese tires are popular for their relatively good quality at a cheap price. This is owing to lower production costs. Locally manufactured tires are more expensive owing to high production costs. Applying the tariff to raise the price of Chinese-produced tires above the prices of locally manufactured tires raises the general prices in the market. This is not favorable to the consumers in the United States as they have to contend with higher prices and reduced disposable incomes.