Trump’s Trade War Looms Over Soybean Farmers 4 Years Later

EconEye Admin

4 years ago

It’s been nearly four years since China put tariffs on American soybeans in a trade war with then-President Donald Trump. The Chinese tariffs hurt U.S. farmers by making American-grown soybeans more expensive for Chinese buyers.—cnn.com

Answer the following questions to check your understanding of the story.

1) Who in China loses from China’s tariff on U.S. soybeans?

The losers are ______________.

a) Chinese consumers because they buy more imported soybean, but pay a higher price

b) Chinese farmers because they receive a lower price and produce less soybean

c) Chinese consumers because they pay a higher price and buy less soybean

d) Chinese farmers because they must pay the tariff to the Chinese government

When China places a tariff on U.S. soybeans, what happens to the price in China, the quantity purchased by Chinese consumers, the quantity produced by Chinese farmers, and the quantity of imports? Who loses?

When China places a tariff on soybeans, the price paid by Chinese consumers rises by an amount equal to the tariff. And when the price rises, they buy less soybean.

2) What is the effect of China imposing a tariff on U.S. soybeans on China’s consumer surplus, producer surplus, and deadweight loss?

a) Consumer surplus decreases, producer surplus increases, and the deadweight loss is eliminated.

b) Consumer surplus and producer surplus remain the same, but a deadweight loss arises.

c) Consumer surplus increases, producer surplus decreases, and a deadweight loss arises.

d) Consumer surplus decreases, producer surplus increases, and a deadweight loss arises.

When China places a tariff on U.S. soybeans, what happens to the price in China, the quantity purchased by Chinese consumers, and the quantity produced by Chinese farmers? How do these changes influence consumer surplus and producer surplus? Is the outcome efficient? Is there a deadweight loss?

With the tariff, the price rises, and the quantity demanded decreases so consumer surplus decreases. The rise in price increases the quantity supplied by Chinese farmers, so producer surplus increases. The sum of consumer surplus, producer surplus, and tariff revenue is less than the sum of consumer surplus and producer surplus with free trade, and a deadweight loss arises.

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