Using concepts and data for the component parts of the aggre

Using concepts and data for the component parts of the aggregate economy (C + I + G + X-M) that you have studied for both the US and China,

Q: What effects are US tariffs on Chinese steel likely to have on both the Chinese and U.S. economies?

Solution

Ans

USA imports from China will fall but it is not a good news. It will create deadweight loss in production and consumption China\'s exports will fall. However most likely China will retaliate by imposing taxes on usa goods. Thus trade will decline and so will welfare of world.