The effects of trade policy on intermediate goods on employment and welfare in usa

PAGE 2 1. INTRODUCTION Tariffs might make a country better off or worse of depending on the characteristics of the country. Given that, it has been a common practice to put tariffs on inputs and intermediate goods, that have had a strong impact on the employment and the welfare of the imposing country. The aim of this dissertation is to analyze data about past trade policy decisions of USA governments and the implication that those trade strategies have had, in order to better understand the current commercial war between China and USA and its possible future effects on employment and welfare. In the first part, trade policy instruments as tariffs, import quotas and subsidies and their effects on welfare are introduced and exposed pointing out the differences between a relatively small country and a relatively big country. Then a few case studies are examined with a specific focus on the outcomes that past trade strategies have had on the U.S. economy: restrictions starting in the 1990s on raw sugar imports and their consequences on refined sugar and sugar containing product industries are investigated first; then employment and welfare costs of U.S. quotas on textile, steel and autos of the 1980s are considered; lastly, the impacts of the 2018 trade war between the U.S. and China on U.S. prices and welfare is discussed. 2. TRADE POLICY INSTRUMENTS 2.1. TARIFFS A tariff is a tax collected when a good is imported. It can be specific or ad valorem: a specific tariff charges a fixed amount for each unit of product imported (for example, a tariff of 1 € for each imported t-shirt), whereas the value of an ad valorem tariff changes proportionally with the price of the good imported. Both increase the price