Do you think the United States should employ more protectionism or less? Why ?

Question

What do you think the end result would be

Answer 1

Monique,

This is an opinion question, and we will all have different opinions, but we can think through this together. :)

What is protectionism and why do countries use it?

So protectionism basically puts tariffs and import quotas on imported goods. The reason for this is best given through an example:

Jen is a business owner in California. She sells dresses. In California, she has to pay her dress makers a minimum wage of $11.00 per hour. She also has to comply with American safety standards. So she spends a good amount of money to make sure all the equipment and working conditions are up to standards. With all these costs, she can only make a profit if she sells her dresses at $20 each.

In other countries, there is no minimum wage. So, say a company in China only pays its dress makers $4 per hour. And imagine they have way less safety regulations so the business owner buys cheap (unsafe!) equipment for the dress makers to use. With these low costs, the Chinese business owner will make a profit if she sells her dresses at just $6 each.

If both dresses are in the store, customers will always buy the $6 dress. And then the American business owner will really suffer. Worst case scenario, she’ll have to close business and fire all her employees.

We don’t want that!

So, what if we put a tax on the dresses from China. Say, the Chinese business owner has to pay our government $14 for every dress she tries to sell in America. Now, she can only make a profit if she sells her dress for $20 each. Now that the prices are the same, the American dress seller will probably sell about as many dresses as the Chinese dress seller.

Okay, yay we are happy for our American dress seller because she stays in business, and all her employees still have jobs! But, the customer is not that happy- she misses being able to buy a dress for $6.

So, in this scenario, do you think taxing the Chinese dress seller was good or bad?

I can’t tell you what to think, but now you fully understand the question. :)

Hope this helps!