The problem states that Canada limits the imports of the dairy products so that it is not more than 10% of the domestic consumption. The main goal of the NAFTA is to remove barriers among United States, Mexico and Canada. The revised version of NAFTA states that the imports will rise to higher levels of the domestic consumption. When more imports will be allowed, the consumers will be gaining as they will be provided with more variety of dairy products. As a result of higher imported goods, consumers will be gaining more. The answer is uncertain because though with the increase in the dairy imports, the consumer may gain due to the elimination of trade barriers, the domestic producers may suffer a loss
Huge amount of deportation in the United States are generally costly and will hurt the economy. When the immigrants are sent away, the employers need to hire new people in place of them. When the immigrants will be removed, it will lead to decrease in the labor force and the Mexican GDP will decrease and will get cut by $1.6 trillion. In general, when migration increases, the wage will decrease. So, when the immigrants are removed the wage for workers in Mexico will increase. This will also lead to increase in the income of the employers. Due to deportation (a) the wages for the workers of Mexico will increase. (b) income of the employers might also increase. (C) the Mexican GDP will decrease and will get cut by $1.6 trillion.
The above diagram of tariff shows that the United States is the importing country who was importing steel from China. The tariff will be affecting both welfare of the consumers and producers.
Consumers welfare: the consumers of the United States will be suffering a reduction in the well fare of the tariff. The rise in the price of the imported goods will reduce the consumer surplus.
Welfare of the producers: There will be increase in the welfare for the producers of the United States as a result of tariff. The rise in the price of the imported products will lead to increase to in the producer surplus. The increase in price will also lead to increase in the output with rise in employment.
When the government of the United States will be using the revenue of the tariff for creating the compensation of the consumer by which will be giving back the revenues to the consumer in the form of check, the answer (a) will change. Then in that case the welfare of the consumers will not get reduced. When the government will be paying back the tariff revenue to the consumers in the form of check, the consumers can then use the money for paying the expensive imported goods.
Welfare of the consumers: the above diagram shows the effects of tariff on both the welfare of the consumers and suppliers. The consumers of China will be experiencing an increase in the welfare as result of tariff. Due to the decrease in the domestic price, the consumer surplus gets increased.
Welfare of the producers: as a result of tariff the producers of the exporting country which is China, will be experiencing a loss in the welfare. The decrease in the price of the product in the market will lead to decrease in the producer surplus in the industry. The reduction in price will also lead to decrease in the output and also lead to decrease in employment.
In this case when the Chinese government will be cutting taxes for compensating the Chinese producers who was hurt by the US tariffs, the producers of china will be producing steel more in domestic markets and will reduce the export in the United States. When the governments will be cutting taxes , the consumers will also be gaining as the prices of the domestic products will go down.
Caliendo, L., & Parro, F. (2015). Estimates of the Trade and Welfare Effects of NAFTA. The Review of Economic Studies, 82(1), 1-44.
Li, Y., & Beghin, J. C. (2017). Protectionism indices for non-tariff measures: An application to maximum residue levels. In Nontariff Measures and International Trade (pp. 167-178).
Villareal, M., & Fergusson, I. F. (2017). The North American Free Trade Agreement (NAFTA).
Why mass deportations are costly and hurt the economy. (2018). Retrieved from https://theconversation.com/why-mass-deportations-are-costly-and-hurt-the-economy-73504