Some Republicans are opposing Trump on tariffs. Maine’s Susan Collins just got him to back down on Canadian levies.
Real-world example for IB, A-Level, AP and IGCSE Economics essays: Tariffs and protectionism, Taxes, subsidies and price controls, Exchange rates
What happened
Maine senator Susan Collins lobbied against certain tariffs on Canada and got Trump to back down, as some Republicans oppose his tariff policy.
The economics
This shows the political process behind protectionist tariffs: the executive branch pushes them, but they can be adjusted under pressure from party colleagues and affected constituencies. A student can diagram how a tariff raises import prices and shifts producer and consumer surplus, then explain how political bargaining changes the final level of the trade barrier.
Evaluation
The partial retreat shows protectionism is not irreversible and may help domestic consumers and firms reliant on Canadian imports; but policy uncertainty raises costs for firms, and only some tariffs were affected, so overall barriers may not fall.
Practice question
Using this example, discuss the political and economic factors that shape the introduction and adjustment of protectionist trade policies.
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.
- Taxes, subsidies and price controls: Indirect taxes, subsidies and maximum or minimum prices that governments use to change market outcomes.
- Exchange rates: The price of one currency in another; appreciation or depreciation changes exports, imports and inflation.
- IB Economics: International Trade, Government Intervention and Market Failure, Exchange Rates and Balance of Payments
- A-Level Economics: International Economics, 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, Government Intervention