International Trade Policy

Over the past several years, some companies in the United States have built factories in other countries to build components for the products they sell. The most common reason for doing so is the cost of labor which is higher in the United States than in the countries in which they build the plants. Congress has discussed adding a higher tariff on those components when they are imported into the United States.

1. Would such a tariff be beneficial or harmful to the United States Economy? Explain.
2. Who would ultimately pay those tariffs if they were enacted? Would it be the companies, the foreign governments, buyers of the products, or the United States Government or someone else? Explain.
3. Under what circumstances would it be wise for the United States government to put more restrictions on products or components imported into the United States? Explain.