Briefly explain why a tariff on imported steel may lead to j

Briefly explain why a tariff on imported steel may lead to job gains for domestic steel workers but can at the same time lead to job losses for domestic auto workers.

Solution

A tariff on imported still will increase the price of the imported steel. This will make domestic steel more competitive with respect to imported steel. Therefore, domestic steel manufacturers would produce more steel and hire more workers because of a higher demand for domestic steel. Also, the existing domestic steel workers might see an increase in wage due to higher demand for workers. Thefeore, the domestic steel workers would be benefitted from it.

Steel is a primary raw material used in the production of automobiles. Therefore, an increase in the price of steel would increase the cost of production of the automobile firms. This will reduce the competeiveness of the firms and they may face a declien in profitability. Therefore, the auto firms would hire less number of workers due a fall in demand and revenue.