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Economics Coursework on Macroeconomics

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The article talks about the Mexican government wants to raise tariffs on U.S. exports. Those tariffs 1would effect and target about 90 U.S. industrial, agricultural products delivered to Mexico. The American concerns are these: tariffs are against the basics of the North American Free Trade Agreement (NAFTA). The other opinion is about these changes is that "these actions that only serve to harm American businesses during these tough economic times when these businesses need a worldwide marketplace to prosper". Mexican government' decision is clear example of protectionism. I am going to analyse the affects of those tariffs on both of the countries. Figure 1: the affect of the tariff what raised on the U. S export Price($) S (Domestic) Pe Pu+t a b c d e f Pu h g i j k Q1 Q3 Qe Q4 Q2 Quantity of agricultural products (tons) ...read more.


The government now receives tariff revenue. The main American problem with this tariff is that at the time of economic recession to impose tariff does not help in the American recovering. During the recession the countries tries to shift the aggregate demand to the right. The existing recession is a special one in the history of the recessions. It is a worldwide one and it involves credit crunch at the same time. Now I am going explain why the Americans are so against this tariff, and why the Mexican government imposed it. Figure 2: the governments needs shift the aggregate demand Price AS AD2 AD1 GDP The aggregate demand is built up by the consumption, investment, government spending, net export. To recover from the recession, the government needs to shift the demand curve the right. ...read more.


less revenue to domestic producers, the tariff makes domestic more competitive and they receive more revenue at the price with the tariff. Furthermore the government could receive significant amount of money from the imposed tariff and with the tariff the import rate decreases what makes the balance of payments better. The further outcomes of the tariff could be: after the tariff Q1Q3 are now produced by relatively inefficient producers, as opposed to more efficient foreign producers. The foreign producers would produce this quantity for a minimum revenue h while domestic producers need a minimum revenue h+c. Thus c represents the inefficiency of the domestic producers there it a deadweight loss. Finally it is a controversial situation, to protect the industries and own employment or support world economic recovery. Word count: 741 1 A tariff is a tax that is charged on imported goods. ?? ?? ?? ?? Adam Szakal Economics Commentary 06.11.2009 ...read more.

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