Explain Comparative Advantage In More Detail.

Comparative advantage shows the reasons why free trade is beneficial to states and how the benefits can be realized. Through this, the poor state can join the international trade so that they can get goods that they are not able to produce hence raising the living standards of the citizens. Global economic welfare can only be maximized through free trade. To realize this, the theory requires that a given country produce goods and services at a lower opportunity cost than its competitors that can attract customers. As a result, they will be able to realize a stronger sales margin that makes them relevant in the market for long periods. In this regards, a country with the best overall package has a comparative advantage over others. Generally, comparative advantage helps the countries involved in international trade to get benefits as a result of their cooperation.

Describe How Tariffs Can Restrict International Trade.

Tariffs increase the price of imported goods hence making them less attractive and unaffordable to consumers. The government can impose tariffs either to raise the revenue of a country or to protect the domestic industries from losing their competitive advantage. Despite the benefits of tariffs to the country that have imposed it, it has adverse effects in international trade. Domestically, tariffs lead to a reduction in competition hence domestic industries can produce goods of low quality. Consequently, the countries good will lose value, therefore, reducing the sale margin thus decrease in revenue.

Due to the increase in the cost of imported goods, the supply curve of products will shift to other countries who have not to impose a tariff on other goods. As a result, the state will have many resources making it grow at a faster rate than other countries. This comes together with economic benefits such as increased employment rate, income level which results in high standards of living.

When a given country imposes tariffs on goods of another state, the state can retaliate by doing the same hence affecting other countries who have are not part of the trade war. For example, when the United States imposed tariffs on steel products from China, other countries who depends on the steel products from the United States will suffer. As a result, there will be a reduction in the trading patterns which can lead to the closure of some industries. This is dangerous in the economy as some countries are made to suffer as a result of a trade war between some states. The affected states will have reduced revenues as well as an increase in the rate of unemployment. Generally, the imposition of trade tariffs between countries can result in an economic disadvantage to all states involved in international trade.

Critique How The Tariffs Discussed And Imposed During The Last Two Years Might Impact On International Trade In Automobiles.

Imposition of the tariff in the automobile industry will lead to adverse effects that range from the increased price of the vehicles and increased sales of the used up cars among other disadvantages. This will be disadvantageous to the manufacturing companies who will experience a reduction in the purchase of their newly manufactured vehicles.

First, the imposition of trade tariffs in the automobiles will increase the sale of the used up vehicles.  The car buyers will look for more affordable alternatives to acquire vehicles for their use. As a result, the supply of the new car will reduce hence making the car dealers to experience a reduction in the profit margin. For example, the sale of Volvo is expected to decrease from 89.4 percent of the sale made in 2017 to a much lower number due to the imposition of trade tariffs in the United States where the company make much of its sales.  Similarly, the Toyota Company, also experience a decrease in the sale of these products as much of the deal they gain is made in Canada and Japan. Even though the countries can seasonally adjust their annual rate in looking for a solution to these problems, this cannot be maintained hence it will continue affecting the industry for unforeseeable future. For the companies to survive this, they need to look for other markets which will make them get other trade partners that can purchase their products.

The tariffs will lead to decreased competition in the automobile industry hence low-quality vehicles. Most of the tariffs imposed in the United States are meant to ensure that they produce their cars. This is dangerous as most companies will not create high-quality production as they only compete with domestic industries. In most circumstance, the vehicles produced locally might not be of the desired quality that customers want but hey will purchase them due to less choice that they are faced with. Even though there will be a sale of domestically vehicle, the sales margin will reduce. For instance, due to trade tariffs imposed by the United States on China’s automobile industry, Chinese car sale have reduced significantly within a short period. This will lead to a loss in both countries, as all states must feel the effects of this restriction.

As a result of the imposition of trade tariffs, general motors has shut down seven of its plants due to a rebuke from Trump. The company does this to force the government to relax this trading tariffs which they have imposed in other countries. Sometimes a given company might produce many vehicles that cannot be consumed in that country alone, and this requires them to make sale outside the state. But with trade restriction, this will not be possible hence causing equilibrium in the supply and demand. The state will have much supply than demand, and the problem of equilibrium cannot be corrected due to the existence of tariffs. Due to oversupply, the company will reduce its production which results in a loss to the company. In as much as a country can manufacture their vehicles, they need to buy other materials from other countries. This will not be effective due to the imposition of tariffs which will make states to be in a trade war with each other.

Increased sale of used up vehicles will result in increased cost of repair of these vehicles. Some of them are used to an extent they need repairs after short distance made. This will increase the cost of replacement of vehicles as many cars will require new spare parts to ease their movement and use. Consequently, the price of spare parts of cars will increase, making countries to spend much money which can be expensive compared to the costs of new vehicles. Repair services are also likely to hike the prices hence making it more expensive. This can be solved by offsetting higher parts but this is not a long-lasting solution as providers of spare parts can exploit the opportunity to raise prices of the of the products. Due to this, the state will experience a lot of burden than when the tariffs were not imposed. For the country to be safe from all the disadvantages of the tariffs, they need to relax their tariffs to allow for free Trade among the countries.

Due to tariffs, the prices of Mercedes Benz will increase in the country thus affecting the general costs of other vehicles in the company. Consumers will try to look for cars that have low prices to purchase. In doing so, the prices of these vehicles increase making the vehicles to be expensive to other vehicles. Many locally produced vehicles are likely to charge much much money since they dominate the market as a result of reduced competition. This will require the intervention of the government to help solve it. It can set a fixed price that all the companies must be adhered to. This will, in turn, affects the automobile industry as the company will feel that the government venture into their business. In a quest to stop this, they can stop the production of vehicles which can result in a deficiency in the supply of car in the economy. This can force the government to relax their tariffs to make the production to increase in the market.

Generally, the imposition of trade restriction has much harm to the market then advantages.Despite getting a boost in the growth of domestic industries, the extension will not be of value as the sale will reduce. Instead of an increase in the growth of these industries, there will be a consequent decrease in growth. These adverse effects can even result in the closure of the domestic sectors when the sale of the products reduces. Sometimes, most of the restriction is politically influenced even when there is no profit expected. This can increase tension between these countries hence making them involve in trade wars. These wars affect the automobile industry which has made many of them fall thus reducing the revenue of various countries. For skilled trade between countries, the government should ensure that they enforce laws that encourage free trade between nations. Trade restriction is harmful to our economy and should be discouraged for the free flow of produced to achieve regional balance.

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