1) I agree with the decision to impose tariffs on tires imported from China, as the benefits to the domestic industry in the United States are many. For instance, the new policy would encourage the domestic industry and help it to ward off competition from low wage countries like China that also have the advantage of a manipulated currency exchange rate. The other benefit to the industry is that the tariffs would ensure that the imported tires are costlier than domestic tires and hence, the industry would regain its competitiveness.
The tariffs would create the problems of a domestic industry that would be mollycoddled and protected from competition, which is not always a good thing. Indeed, by making the domestic industry dependent on governmental action to sustain itself, the firms ought to be concerned because they are being shielded from competition that would boomerang on them in the longer term. The clear implication of this situation is that domestic industry must be protected but not in so overt a manner. Hence, the decision to levy tariffs has both advantages and disadvantages for the domestic industry.
2) The tariffs imposed by the United States might actually harm some companies as they would be shielded from competition and hence, would be unable to stay competitive in the longer term. For instance, the domestic industry would not need to produce high quality tires or models that are of good quality and at the same time inexpensive when compared to the imports. This would mean that some firms would atrophy because of lack of competition.
When the tariffs expires, the tire industry in the United States would again be faced with competition and hence, the firms must be concerned as well as the workers because they would have to compete with Chinese tires. The workers who got back their jobs have to pull up their socks and work hard once the tariffs expire which might result in another round of layoffs as the workers had it easy during the time the tariffs were imposed. Hence, the decision to impose tariffs has both beneficial and harmful effects on the domestic tire industry and the workers employed in that industry.
3) Amongst all the stakeholders, the clear winners are the US consumers when tariffs were not imposed because they have greater choice and lesser money to spend on tires. Since the Chinese tires are low cost when compared to domestic tires, the consumers in the US stand to benefit. Of course, once the tariffs have been imposed, the consumers stand to lose, as the prices would increase again. This is one of the reasons why protectionism is thought to be a bad thing as the consumers lose out when protectionism rears its ugly head.
On the other hand, the need to balance the interests of the workers is also present which means that on the whole, the tariffs would be a bad thing for the consumers in the shorter term whereas a good thing in the longer term. The situation is vice versa for the workers who stand to have shorter-term benefits as opposed to longer-term benefits. In conclusion, protectionism is rearing its ugly head all over the world and hence, the policymakers have to balance the different and competing interests of all the stakeholders when they impose tariffs on foreign products.
Works Cited
Krugman, Paul R, and Robin Wells. Macroeconomics 3rd Edition. New York, NY: Worth Publishers, 2010. Print.
