Question

Why would American automobile workers generally support tariffs being placed on foreign imported cars? (A) Tariffs lower the prices of American-made cars. (B) Tariffs make the imported cars more expensive, increasing the demand for American-made cars. (C) Tariffs can help mend strained relationships between hostile nations. (D) Tariffs can promote free trade among competing nations.

Short answer

(B) Tariffs make the imported cars more expensive, increasing the demand for American-made cars.

Step-by-step solution

Option A: Tariffs lower the prices of American-made cars.

This option does not fully explain the benefits for American workers. While lower prices of American-made cars might increase their competitiveness, it is not the direct effect of tariffs on foreign imported cars. So, this is not the best answer.

Option B: Tariffs make the imported cars more expensive, increasing the demand for American-made cars.

This option states that if tariffs are imposed on foreign imported cars, their prices increase, which leads to higher demand for American-made cars. When the demand for American cars goes up, it benefits American automobile workers as there will be more jobs and potentially higher wages in this sector. Therefore, this option is the most plausible answer.

Option C: Tariffs can help mend strained relationships between hostile nations.

Although tariffs may sometimes play a role in international political discussions, this option does not provide a direct benefit to American automobile workers and is unrelated to the support they might have for tariffs on foreign imported cars. So, this option is not the best answer.

Option D: Tariffs can promote free trade among competing nations.

This option is contradictory, as the imposition of tariffs generally hampers free trade rather than promoting it. Moreover, this statement does not directly explain the benefits to American automobile workers. Therefore, this option is not the best answer. Based on the analysis, the best option to explain why American automobile workers generally support tariffs being placed on foreign imported cars is: (B) Tariffs make the imported cars more expensive, increasing the demand for American-made cars.

Key concepts

International Economics

International economics is a field of study that examines how countries engage in economic interactions with one another, including questions of trade, finance, and policy. A key aspect is the impact of tariffs, which are taxes imposed on imported goods. In the context of our exercise, tariffs can have a profound impact on trade dynamics between countries. When a country like the United States imposes tariffs on foreign imported cars, it directly affects international trade by making these imports more expensive.

Tariffs are often used as a tool to protect domestic industries from foreign competition. For American automobile workers, tariffs on foreign cars can lead to a reduced competition from imports, allowing US manufacturers to increase their market share within the country. This protective measure can lead to an increase in domestic jobs and potentially higher wages as the demand shifts towards American-made cars. However, it's important to note that while tariffs can protect certain jobs in the short term, they may lead to higher prices for consumers and potential retaliation from other countries, which can have broader negative implications for the economy.

Imported Cars Impact

The impact of imported cars on a country's economy and its workforce is multi-faceted. For one, imported cars represent a significant competition to domestic car manufacturers. When consumers have the option to purchase less expensive or perceived higher-quality foreign cars, the domestic car market can suffer.

With tariffs imposed, imported cars become more expensive, which discourages consumers from buying them. This can be beneficial for American automobile workers and manufacturers as the demand may shift towards domestically produced vehicles.

Economic Theories at Play

The concepts of supply, demand, and price elasticity are fundamental to understanding this shift. If the demand for cars is price elastic, a rise in prices of imported cars due to tariffs will lead to a larger decrease in quantity demanded, thereby boosting the demand for American-made cars. This illustrates how tariffs serve as a trade policy tool aiming to tip the scales in favor of domestic production.

Demand for American-made Cars

The demand for American-made cars can be influenced by various factors, including but not limited to economic policies such as tariffs, consumer preferences, and perceptions of quality. When tariffs increase the costs of foreign cars, consumers might turn to American cars as a more cost-effective option, which in turn can increase demand for locally manufactured vehicles.

Demand Surge Effects

A surge in demand can lead to an increase in production and thus more job opportunities for American automobile workers. More jobs can mean a stronger economy and improved living standards for workers. However, it's important to acknowledge that an increase in demand could also lead to higher prices for American-made cars if the supply does not keep up with the demand. This balance between supply and demand is crucial in determining the overall success of such a tariff policy in making American cars more appealing and sustaining the jobs it aims to protect.