You are an employee of a US firm that produces personal computers in Thailand and then exports them to the US and other countries for sale. The personal computers were originally produced in Thailand to take advantage of relatively low labor costs and a skilled workforce. Other possible locations considered at that time were Malaysia and Hong Kong. The US government decides to impose punitive 100% ad valorem tariffs on imports of computers from Thailand to punish the country for administrative trade barriers that restrict US exports to Thailand. 1. How do you think your firm should respond? 2. What does this tell you about the use of targeted trade barriers?

Expert Answers

An illustration of the letter 'A' in a speech bubbles

There are almost always winners and losers when governments begin to impose tariffs and counter-tariffs on each other’s exports. That is because there are multiple segments of each country’s economy that profit from different equations. One easy-to-explain example is the steel industry, the subject of frequent trade-related disputes between and within nations. Tariffs imposed on imported steel help domestic steel producers who would otherwise be incapable of competing against lower-cost imports. Domestic steel producers, therefore, support the imposition of tariffs on foreign sources of steel. On the other side of the equation are those industries that do not produce steel, but which use large quantities of steel in their products. Automobile manufacturers and ship builders are major users of steel in the construction of their products. They do not care where the steel comes from; they only want to purchase steel from the least expensive sources available, which, in the United...

(The entire section contains 3 answers and 1197 words.)

Unlock This Answer Now

Start your 48-hour free trial to unlock this answer and thousands more. Enjoy eNotes ad-free and cancel anytime.

Start your 48-Hour Free Trial
Last Updated by eNotes Editorial on February 6, 2020