In an article published on 23rd October 2020 in the Economist Magazine titled “T ariff Man” (available on OLE), it is said that “Although Mr T rump claimed foreigners were paying the $80bn of revenue the tariffs raised, economists found that, in fact, American importers paid it.”
Part (a)
Briefly explain the possible economic mechanisms that make what are essentially taxes raised on goods imported into the US to be paid by the American importing companies, and not by the exporters from other parts of the world.
(The word limit for this question is 200 words)
Part (b)
The same article mentions that in Mr T rump’s presidential term, the US withdrew from a 12-country T rans-Pacific-Partnership (TPP), and instead signed a number of separate bilateral or trilateral trade agreements. In the context of the methods of reasoning used in the Ricardian and specific factors models, do you think this strategy taken by Mr T rump will likely result in more economic gain for the US?
Sample Solution
