White House lifts tariffs on some Canadian goods as midterm elections loom
Real-world example for IB, A-Level, AP and IGCSE Economics essays: Tariffs and protectionism, Supply, demand and prices, Taxes, subsidies and price controls
What happened
The White House announced that from 30 October it will adjust tariffs on Canadian goods, easing them on some products such as certain machinery while placing them on others such as carpets.
The economics
This is a clear case of protectionism and trade policy: tariffs change the relative prices of imports, so goods facing new tariffs see reduced supply and higher prices in the importing market, while goods with eased tariffs become cheaper and more competitive. Students can draw a supply and demand diagram for Canadian exports to show the tariff shifting import supply left, raising price and reducing import quantity.
Evaluation
The effect differs across industries, creating both winners and losers; the timing close to midterm elections also suggests trade policy can be driven by political cycles rather than economic efficiency alone.
Practice question
Using this example, analyse the effects of imposing tariffs on imported goods on consumers, domestic producers and resource allocation in the importing country.
Read the article ↗ · Draw the diagram in the Diagram Lab
Where it fits in the syllabus
- Tariffs and protectionism: Tariffs, quotas and similar barriers that shield domestic producers, at the cost of higher prices and possible retaliation.
- Supply, demand and prices: How a change in demand or supply in one market moves its equilibrium price and quantity.
- Taxes, subsidies and price controls: Indirect taxes, subsidies and maximum or minimum prices that governments use to change market outcomes.
- IB Economics: International Trade, Demand, Supply and Elasticity, Government Intervention and Market Failure
- A-Level Economics: International Economics, Supply and Demand, Government Microeconomic Intervention
- AP Macroeconomics: Open Economy: International Trade and Finance
- AP Microeconomics: Supply, Demand and Market Equilibrium, Market Failure and the Role of Government
- IGCSE Economics: International Trade and Globalisation, Demand and Supply, Government Intervention