Question

Suppose the US runs a trade deficit with China. What happens to the net exports of the two countries when tariffs are imposed in the trade war?

Answer 1

Ans.

- The U.S. trade deficit with China in 2019 was $345.6 billion.

- The trade deficit exists in light of the fact that U.S. exports to China are very less in value and were just $106.6 billion while imports from China were $452.2 billion.

- Which means that US is running a trade deficit with China.

- In this situation when US is imposing Tariff are imposed by US it will increase the price of the imported goods for the importers in US and this will discourage the imports.  

Tariff can reduce the US imports from China and reduce the deficit.

- However even if China retaliate the tariff US exports to China are very less and will still help US to reduce the deficit.