Question

China will reduce the tariffs it imposes on imports of US automobiles from 40% to 15%. Will this result in an increase in the production of automobiles and/or parts in the US?

Answer 1

In the real world situation of multilateral trade where the US does trade with the entire world and so does the China, the assesment of the impact of the reduction in the rate of tariffs would vary.

But if we keep other things contant and consider this as a bilateral trade case, the reduction in traiffs on imports of US automobiles from 40% to 15% would make the imports cheaper for the Chinese. Chinese will demand more automobiles from the US because of its less price. In order to fulfill this demand the US autmobile industry has to increase output. Thus, it will result in more production.