Question

Who are the most likely winners and losers of President Trump’s proposed import tax in the United States? illustrate using the concepts of consumer and producer surplus and deadweight loss

Answer 1

Winners:

Aluminum and steelworkers- As soon as the tariffs come into effect, the U.S. aluminum sector could charge greater rates. The two major U.S. firms— Century Aluminum and Alcoa — saw their shares jump after Trump produced his large ad. U.S. steel firms also smile at tariff prospects by the end of the week. Steel stocks were jumping together with the U.S. Steel, for instance, is rising by about 8%. For these businesses, higher prices imply fatter earnings. U.S. steel-using manufacturers would also need to purchase much more domestically, another boon for American steel businesses.

Foreign auto, tool and machine part makers- As aluminum and steel prices jump in the U.S., it also increases parts prices, making overseas components more attractive than American components. Instead of purchasing from American parts and tool markers, large businesses selling vehicles and microwaves and other products may simply decide to create and import the entire product overseas. That's likely going to get around the tariff, but keeping expenses low.

Losers

Canada- America's northern neighbor is by far the biggest overseas steel and aluminum source entering the United States. It's going to get the most harmed if Trump moves forward on all countries with the blanket tariff. Many companies and the White House pro-free trade group are pressing for exemption from the tariff for Canada. Canada accounts for about 40% of U.S. exports of aluminum and about 16% of U.S. imports of steel.

Ford and GM. American cars have a lot of steel. As steel prices rise, businesses such as Ford and GM must either consume the cost or risk attempting to pass it on to customers. If Trump's tariffs go through, Goldman Sachs projects Ford and GM will both lose $1 billion each year. Both stocks dropped significantly, a prospective predictor of what is to come.

U.S. farmers and agriculture companies- If Trump passes through the tariffs, Canada, Europe and other countries are already threatening to retaliate. U.S. agriculture is likely to be one of their top objectives. They understand another important portion of Trump's electoral base would harm. Farmers lobbied the White House to maintain NAFTA and other trade treaties. For example, China is the world's top soybean buyer, and every year Canada imports from the United States about $25 billion in agricultural products.