Question

7. Suppose the case for Donald Trump's proposed tariff on China is the retaliation of unfair trade practice being conducted by China trade policy on US exports of goods and services to China, and also due to their continued piracy of US business intelligence. In pursuing this proposed tariff to be effective, what type of imported goods of services with price elasticity of demand would be appropriate to impose tariff without much negative effect on US consumers? Give specific example to substantiate answer. your

Answer 1

In pursuing this proposed tariff to be effective, it is better to implement tariff on the imported goods and services from China with high price elasticity of demand. This is because the demand for these goods can be adjusted with other substitute goods and also the burden of increase in the price level will not fall much on the consumers because demand of the good is relatively elastic. For examples tariffs can be imposed on the import of smartphones whose demand is elastic and will not have much negative impact on US consumers.