Economics 101 Tariffs and the World Economy

Tariffs and the World Economy
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Tariffs and the World Economy
According to an article by Yue, (2018) titled A quick review of 250 years of economic theory about tariffs, Harvard Business review: National Competitiveness, tariffs are levies imposed by a country, and are enacted by countries to discourage people from importing goods; it is a strategy of compensating for the trade deficit. Looking at the bigger picture,it is aimed at promoting local products that often suffer at the hands of imports in a tariff-free environment.Tariffs are back after a long period of abolishment, and it has created a economic war between the U.S and China, as well as with the European Union.
Both the U.S and China are imposing excess taxes on imports to protect their local industries and hence to improve on trade imbalance (Lautour, 2018, p. 153). The U.S is continuously imposing taxes on goods from China and since the U.S imports more goods from China, the tax goes as high as $500 billion. China in their part is trying to do the same as well, but cannot match the U.S tax revenue on imported goods,perhaps due to its market structure and economy,which are still developing. This war is negatively impacting the economy by distorting supply chains and investments as there is always a constant state of speculation as far as the market goes.
Yue(2018) points out that the idea of imposing taxes is a wrong way of compensating for trade deficit and instead, countries should aim at exporting more goods. More export can help a country have trade balance; this strategy has been used and has made countries such as the U.K a dominant trader in the global economy. The UK benefited from the theories of the two great economists, Adam Smith, and David Ricardo. Smit...