PUBLIC POLICY
The idea of imposing more tariffs on Chinese goods by President Donald Trump has affected the consumer buying behaviour in different ways. For a long time, China has been an important trade ally of the US and vice versa. The recent trade tariff policy has positive and negative consequences on the consumption behavior of Americans.
On a positive note, imposing tariffs on Chinese goods will increase consumption of US products in the long run. When tariffs are high on Chinese products, the domestic US industries can sell their goods at a lower price. They can increase production and employ more people. When the employment rate is high, the disposable income increases leading to high purchasing power, which enables Americans to buy and consume more items.
Despite the projected benefits of imposing tariffs on Chinese goods, the negative impacts are dire. First, China has responded to President Trump’s tariffs by imposing more taxes on US products. Currently, the United States export surplus agricultural products such as vegetables, beef, seafood, pork, and soybeans to China. Since China has imposed tariffs on some of the products, the US farmers have trouble finding a market for their produce. Due to a reduction in the global market, the sales will reduce as well as profit.
Consequently, the farmers will cut down on production costs through measures such as employee retrenchment, thus reducing the disposable income, consumer’s purchasing power, and aggregate demand. Furthermore, China has issued a warning on imposing more taxes on US firms operating in the country. This action will increase the production cost and price of goods such as HP computers and Apple electronics that enjoy low labor cost in the country. This burden will then be transferred to consumers leading to fewer purchases.
In summary, Donald Trump’s public policy on tariffs on Chinese goods will affect consumer buying practices. It will increase purchases in the long run, but the current consequences remain dire. Hence, it is recommended that the president should revise the public policy to stabilize the state of the economy.