How would tariffs on foreign goods strengthen a country’s economy? Conversely, how does another country imposing tariffs cost the target country money?

Question

I read an example recently where the Obama administration imposed tariffs on tires from China and in response China imposed tariffs on chicken from the U.S. Both were said to have ‘cost’ the U.S. (in tire prices passed to consumers and … it wasn’t clear). How does this work?

In: Economics

Answer 1

The idea is if we put tariffs on Chinese tires, then Chinese tires cost more. Yes, China will pass costs on to buyers. So, tires will get more expensive. However, this should encourage others to begin manufacturing tires in the US (or at least counties that don’t have tariffs).

They have a market advantage and can offer products cheaper than China. That’s how it helps the US economy. By making US manufacturing more competitive than cheaper, foreign manufacturing.

That is one reason Toyota started opening assembly plants in the US. To get around import costs, they do a certain percentage of the manufacturing in the US. This created thousands of jobs in the US.