Question

China is now importing soybeans from Brazil instead of America because of the U.S.-China trade world. Draw a diagram to show how a tariff imposed by China may affect consumers and producers of soybean in Brazil ( a third world country) (USING THE CONCEPT OF CONCEPT OF INTERNATIONAL TRADE please)

Answer 1

A tariff imposed by China will result in increase in the price of soybeans in its own country while the price for soybeans decreases in the rest of the world. That means , the price for soybeans would rise in Brazil.

P_FT = Price without tariff ( free trade )

P_T = Price after tariff

Now as we can see from the graph, when tariff is imposed on imports of soybean, the price in Brazil falls. As a result, the demand for soybeans in Brazil rises and the consumers experience a rise in welfare. Due to the decrease in price, consumer surplus increases by the amount 'e'.

Now as for the producers, the decrease in price results in decreases in their welfare. Producers experience a fall in producer surplus by the amount ' f + g + h'. Now with the price decline, their profit decreases as well.