“Ukraine plan to raise import tariffs on range of goods alarms US” – Mini Internal Assessment

Tariffs, are the taxes imposed on imported goods and services. Tariffs are mainly used to restrict trade, creating barriers between countries that import and export goods.

In this article, it reports how as we are facing an economic slowdown around the globe, Ukraine is planning to increase tariffs on more than 350 goods, which includes vegetables, plants, meat, washing machines, and all the way to automobiles.These imports are said to be worth $4.6bn (£2.9bn) in total.

These implications by Ukraine has been a concern to the members of the World Trade Organisation (WTO), as well as giving concern to the US. By increasing tariffs, some fear the possible knock-on effect on other countries that are restricting trade.

The effect of tariffs on imported goods can be seen on this graph below:

As seen on the graph, imported goods have decreased from Q2 → Q1, as well as Q4 → Q3, due to the price increase from P(World) to P(World) + Tariffs. However, domestic producers have benefited from this. Producers have increased from Q1 → Q3, which means that the unemployment rate has decreased. In addition, the tax revenues for the Ukrainian government have increased, which means that there is an increase in competition against imported goods for domestic producers. The triangle marked “A” indicates the dead weight loss to society (DWLS). In this case, the DWLS is for the producers, who are not capable of producing anymore, due to the price raise. DWLS is the cost produced by market inefficiency. The triangle marked “B” indicates consumers who cannot consume the goods anymore.

In conclusion, the increase in tariff would be a positive change for the domestic producers, employees, economy, and the government. However, if Ukraine increases its tariffs, the foreign producers and domestic consumers will not benefit.


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