Presumably, since the United States is a large country in many of its internatio

Question

Presumably, since the United States is a large country in many of its international markets, a positive optimum tariff exists for this country. It follows therefore that when any legislator or government official who promotes zero-tariff free trade policies, is by definition not acting in the public's best interest. discuss

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Explanation / Answer

True, but having zero tariff has its own costs and benefits . Now we have to weigh both costs and benefits .

Costs

Zero tariff means cheaper goods will be imported to US . This means unemployment in US because public will demand foreign good and thus firms won't undertake fresh investment.

Bad for US economy as import bill will increase . Increased import bill will reduce US savings this will impact investment .

Future generations will bear the burden of increased debt.

Some of US industries will become uncompetitive .

Benefits

US citizen can have goods at a cheaper rate . Thus a good can be enjoyed by a larger section of population . This will increase welfare among marginalized and poor .

US can concentrate on industries in which it has comparative advantage . Thus it will lead to specialization of trade by US in industries in which it has comparative advantage ..

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