Question

Explain how trade barriers save jobs in protected industries, but only by costing jobs in other industries

Short answer

by raising the price in protected industries

Step-by-step solution

Step 1. Introduction 

Trade barriers refer to the restrictions imposed by the government on the trade of certain goods and services with the motive of protecting domestic consumers and producers. Tariffs, quotas, standards, etc. are examples of trade barriers.

Step 2. Explanation

The imposition of trade barriers to protect an infant industry causes the price level in that industry to increase. As consumers spend more on products from this industry, they would be left with less money to spend on other industries. This would reduce demand in other industries, further causing a reduction in production and employment.

If the protected industries supply inputs to other industries, an increase in price in protected industries would cause an increase in the cost of production in other industries. This rise in production costs would also cause a reduction in jobs.