Tariffs are an instrument of trade policy, However, it seems that reaching an agreement that essentially cuts
Question:
Tariffs are an instrument of trade policy, However, it seems that reaching an agreement that essentially cuts tariff has also required to deal with many more chapters than just merchandise trade Take a demand vs supply approach
a) What is the effect on the output market of removing tariffs on US imports from China And what is the consequence for the exchange rate versus the US dollar?
b) However, it seems that China also committed to
(i) buy more American goods and
(ii) better protect the investment of US companies in China The latter two measures that China agreed with can be interpreted as a way to balance the consequences that you discussed in 1a,
why?
c) Greater transparency on currency management seems to be a crucial part of the deal Can you guess why? (Maybe you want to refer to examples from the past of the USChina trade relationship)
Expert Answer:
a The output market would be increased because there would be more imported goods available The exchange rate would likely appreciate because the dema... View the full answer
