Mexican American Tariff Essay

On the 20th of October in 2015, the American news channel, CNBC, posted an article on their website regarding a international trading issue between Mexico and the U.S.. International trade has a wide variety of benefits as it can lower prices, lead to a greater range of choice, and economies of scale, and more efficiently allocate resources. Referring the to article, it states that due to the trading of raw sugar the price has decreased from over 40 dollar cents to less than 20 dollar cents. The disadvantages of trade allow protectionism. Protectionism is when a government can implement a ruling to protect their domestic market. A subsidy is an amount of money paid by the government to a firm per unit of output. The Mexican government highly

A tariff is a tax imposed on imported goods. It is placed on foreign producers, so it has no influence on the domestic producers. It helps the domestic producers. It increases the production of domestic producers and increases their revenue while decreasing the amount of foreign goods that join the market. The U.S. could potentially implement a tariff, which would result in a decrease of imported goods and raise the prices of sugar in the U.S.. The solution of a tariff has 4 different stakeholders involved; the Mexican domestic farmers, the American domestic farmers, the American government, and the American consumers. The Mexican domestic producers would supply the same amount but have to pay the tariff to the American government. The American domestic farmers would increase their production and therefore increase their revenue. The American government would receive increased revenue of the amount of the tariff paid by the Mexican producers, which is then passed onto the consumers. The price for the American consumers would increase due to the sugar becoming more expensive – seeing as the Mexicans won’t be able to dump sugar into the U.S. market. Therefore, this would create a blockage for Mexico trading sugar into the American market. It is also necessary to evaluate sugar in correspondence to it is elasticity as this influences the overall effect of the tariff placed. The tariff increases the price of the sugar yet due to sugar being an agricultural and inelastic good the demand does not significantly fluctuate with the influence of