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Discuss the possible reasons for the introduction of higher tariffs from the US on products imported from China [15]

Firstly, it’s important to look at the breakdown of a 15-mark question – 3 Knowledge, 3 Application, 3 analysis and 6 evaluation marks. This will act as a guide to ensure you achieve the maximum number of marks.In this case, we can start to answer the question by defining the key terms in an introduction. Tariff – A tax on imported goods. A sentence can be added in the introduction giving a current example of these higher tariffs. E.g. Recently, the US has imposed tariffs on $112bn (£92bn) of Chinese imports such as shoes, nappies and food.The main body of the response should be broken down into two main points. Firstly, higher tariffs are likely to benefit US firms. This is because the higher prices of goods allow more US firms to enter the market and cover their costs of production (ILLUSTRATED USING A TARIFF DIAGRAM). This in turn may help to reduce the level of unemployment in the US. Secondly, the US are likely to benefit from additional tax revenue. The US government can increase economic welfare by subsidising domestic firms in order to increase their price competitiveness and make these consumer goods more affordable for the public. A subsidy is an injection into the circular flow of income and can help to increase the level of economic growth within the economy (DIAGRAM OF AD SHIFTING OUTWARDS).There should then be two points of evaluation to show that the response is balanced and ‘discussing’ the possible reasons. Firstly, China have retaliated with tariffs on US goods such as crude oil. This is likely to offset the improvements in the unemployment rate as US workers in the crude oil industry may lose their jobs as a result of the higher prices of US crude oil for Chinese consumers. Secondly, the impact of the additional tax revenue depends on how it is spent by the Government. The political will of the government may be focussed on re-election, which results in the revenue being spent on areas which do not maximise welfare, but instead help the party to gain popularity.

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