Tariff is not pro producer and anticonsumer? ASAP?

Question

Please help me ASAP.I've a debate on it..If any information is provided in any websites,then pls let me know....I would be very grateful to you, if you help me.....pls give details with real life examples...if there is any relevant statistical information, then pls pls pls tell me...thank you

Answer 1

Tariffs throw a wrench in the works of supply and demand. Tariffs artificially raise the price on a competing product and cause consumers to purchase the product without the tariff.

An example:
Company A produces an Automobile called "Model A"
Company B produces an Automobile called "Model B"

Model A is made domestically (i.e. in the USA). Model B is made in a foreign country. Both are the 4-door station wagons. Without tariffs, both vehicles sell at the same price. Model A gets 12 Miles Per Gallon (MPG), and Model B gets 30 MPG. Consumers get a better value from Model B because of the higher gas mileage, so they all buy B.

The government states that Model B's sales are hurting domestic workers. A tariff is introduced that raises the price of Model B by $5,000. Consumers look at the sticker price and begin to buy A instead of B.

So, the tariff seems to help Model A, and all is fine in the domestic economy? Right?

In the short run, yes. However, you must look at the long run.

Company A enjoys a higher amount of sales ONLY because of the $5000 price difference caused by the tariff. Without the tariff, the only way for Company A to compete would be to make a more efficient car - one that can also get 30 MPG or better. Because the tariff is in place, company A has no incentive to create a car with better gas mileage.

Because Company B cannot eliminate the tariff, they compete with efficiency. Company B makes a new, improved Model B that gets 100 MPG. Developing the new Model B takes 10 years, and when the new B is introduced, customers buy all Bs, but no As. Now, Company A is a decade behind Company B in terms of innovation, and higher tariffs are needed to protect Company A from failing.

The result with the tariffs is that Company A cannot hope to compete with Company B's technology, and there are higher prices for consumers, who must now either own a hopelessly inefficient car (Model A) OR pay thousands of dollars more for a good vehicle (Model B).

If you want a real-world example of this: Company A is General Motors. Company B is just about every non-US-made vehicle.

Answer 2

Tariffs help industries which include both producers and workers. It increases prices for the products of the industry, so it hurts consumers who do not work in the industry, but it protects jobs and tends to increase wages for industry workers, so it may help them. You have the weak side of the argument, so talk about the unemployment and lowering of wages that reducing tariffs produces.