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Who are the winners and losers from trade restrictions?

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armyof32000 | Salutatorian

Posted July 30, 2013 at 8:30 PM via web

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Who are the winners and losers from trade restrictions?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted July 30, 2013 at 8:52 PM (Answer #1)

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In general, the people who win when trade barriers are erected are those people who produce goods that can be imported from other countries.  In general, the people who lose when trade barriers are erected are those who have to buy the goods that are (before the tariff) imported.

Trade barriers work to make the price of imported goods higher or to make these goods less available.  Tariffs place a tax on each imported good.  This, in effect, makes imports more expensive.  When imports become more expensive, people are more likely to buy goods made within their own country.  The prices of those goods did not rise and therefore they are cheaper than they used to be relative to the imports.  Other trade barriers make it harder to get goods into a country.  Therefore,  trade barriers help the people who produce domestic goods win because there is greater demand for their goods.

However, the consumers lose in this process.  Before the tariff or other trade barrier was established, the consumers could get as many imports as they wanted at relatively low prices.  This was good for them.  After the barriers are erected, they can get fewer of the goods, or they have to pay more for them than they used to.  This is bad for the consumers so they lose.

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