Question

According to the Stolper-Samuelson theorem, would you expect capital owners across the globe to favor tariffs given that due to technological advances, production of most goods the world over are capital intensive? Why or why not?

Answer 1

As most of the goods in the world are capital intensive and uses huge capital to be produced, capital owners will be favoring tariff in the economy. For example, there are capitalist in Germany and in USA, we are assuming US has cheaper and more capital than Germany. US will export more of the capital intensive goods as they are cheaper.

This will reduce the return on Capital in Germany as they are importing those capital goods at a cheaper rate, they will favor tariffs to increase their return and price of the imported goods.