The United States Tariffs on Chinese Steel

611 words | 3 page(s)

There have been many instances in the international markets where one country imposes tariffs and trade protection in order for one country to protect its products. This kind of scenario is witnessed in the article U.S. Imposes 266% Duty on Some Chinese Steel Imports. According to the article, the United States took the initiative to impose trade tariffs and taxes in order to save its local industries. The tariffs were imposed on several countries with China being largely affected.

China was handed a tariff of 265.79% for steel makers within the country. The main reason for imposing the tariff on China was the accusation that China was dumping its products. The dumping meant that China got to sell its products at lower price for the sole purpose of gaining a greater market share; a move that China denied. The decision was reached after a massive $ 1.5 billion loss was realized at Steel Corp. and close to $ 8 billion at ArcelorMittal; two of the biggest steel making companies with operations in the United States. The tariff imposition of Chinese steel makers proved to be a good decision as the demand for United States products will increase.

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The Chinese and the United States situation on the implementation of the tariff can be well demonstrated using a tariff diagram as well as an AD Curve. In the figure above, Pe and Qe represent respective prices and quantity supplied and demand. Qe and Pe represent the equilibrium states at which the steel is which according to the article is $ 400 per ton. P represents the price at the steel is supplied and demanded before the tariff is imposed. At price P, the Chinese supplied steel at quantity level Q1 while the demand for the rest of the world was Q2.

This is a clear indication that China was enjoying majority of the market as compared to other world markets. With the United States imposing the tariff, changes were realized in terms of the quantities supplied by China and level of demand for the rest of the markets as well as the prices. P1 in the figure represents the new world prices after the tariffs were imposed. As clearly indicated, there is an increased in the world prices for steel. At P1 the quantity supplied is Q3 while the quantity demanded is Q4. With the United States imposing the tariff, a shift in the quantity demanded in the world markets increased.

The above diagrams also show the effect in terms of the American market. There is a clear indication that steel from the United States had more market after the tariff. This is indicated by the increase in supply from the illustration above. The illustration indicates that after the tariff, the demand for steel is expected to rise from 15 to 20 million tones in one year.

Despite the fact that the tariffs are expected to boost the United States markets, the effect is not expected to be that of a long term. From different analysis, the rise in prices is expected to improve the market by a significant low percentage. The overall turn around in the United States markets is expected to take longer than expected. This is due to the fact the tariff imposition was not aimed at protecting the local industries in the United States but disrupt China’s dominance in the global market.

In conclusively, the United States decision to impose tariff on Chinese steel makers was a move directed at protecting local industries. The move is expected to increase the demand of the United States steel. However, this move will not bear fruits soon as expected as the effects are deemed to be witnessed after some time.

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