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International Trade Debate

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International Trade Debate
XECO 212

International Trade Debate
The strength of the dollar rests on the fundamental strength of the US economy. The main problem with a stronger dollar is the concern of exports. A stronger dollar makes U.S. exports more expensive for foreign consumers and buyers. A tariff is a tax that one country sets on the imported goods or services of another nation. A quota in international trade is a government imposed limit on the quantity or the value of the goods and services that may be exported or imported over a specified period of time. Quotas are more effective in restricting trade than tariffs, particularly if domestic demand for a commodity is not sensitive to increases in price. Because the effects of quotas cannot be offset by depreciation of the foreign currency, quotas may be more disturbing to the international trade mechanism than tariffs.
A tariff raises the domestic price, the domestic sellers will make out well while the domestic buyers are worse off. Tariffs hurt the country that imposes them, as their cost outweigh their benefits. Tariffs are a benefit to domestic producers who now face reduced competition in their home market. The reduced competition causes prices to rise. There are costs to tariffs. The price of the good with the tariff has increased; the consumer is forced to either buy less of this good or less of some other good. The price increase can be thought of as a reduction in consumer income. Since consumers are purchasing less, domestic producers in other industries are selling less, causing a decline in the...

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