On the Iron Range in Northern Minnesota, about 2,000 miners have been laid off o

Question

On the Iron Range in Northern Minnesota, about 2,000 miners have been laid off over the last couple years. These miners worked in taconite mines. Taconite is used to make steel. Currently the world has an excess of steel capacity due primarily to the slowdown in the Chinese economy. As China has shifted away from building more industry and focused more on building a consumer economy, their need for steel has dropped dramatically. As a result, the demand for taconite and iron ore has also dropped. With the drop in demand, miners are laid off. The miners have been aggressively pushing the national legislators from Minnesota to increase tariffs on imported steel and set import quotas. 1. If the tariffs and the quotas were passed into law, who would be helped? Explain 2. If the tariffs and the quotas were passed into law, who would be hurt? Explain 3. If you were a senator from Minnesota, would you support the increased trade barriers? Explain 4. If you were a senator from Washington State (a state with no mining or steel mills), would you support the increased trade barriers? Explain

Explanation / Answer

1) If the tariffs & quotas are passed into law definitely domestic steel production companies, taconite producers & workers will get benefitted. Because if these laws are created foreign steel products will become expensive. The domestic steel industry will be saved from tough competition. Industry will be able to maintain its production & sales & workers will not lose their jobs.

2) If the tariffs & quotas are passed into law definitely it’s not going to benefit everyone. Domestic manufacturers of automobiles, who have significant exposure to exports will be hurt. They will no longer be able to procure foreign steel at same price & use domestic steel which will increase their cost of products. Thus it will be difficult for them to sell costly products in foreign markets which will definitely lower their sells. This will apply to all manufacturers whose profits rely more on exports to other markets as their products will be expensive.

3) If I was senator from Minnesota, yes I will support trade barriers to an extent which do not affect other industries & trade relations with other countries significantly. I mean will support balanced trade barriers.

4) If I was a senator from Washington then also I will support trade barriers to an extent which will not have a significant impact on the economy. Because trade barriers are sometimes essential to protect domestic industry which due to external factors may not be able to sustain growth. Also if any mining company shuts its operations or suffers losses it will negatively affect whole economy.

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