Chapter 2
Q. 2.ST.2
Explain why U.S. tariffs may change the composition of U.S. exports but will not necessarily reduce a U.S. balance-of-trade deficit.
Step-by-Step
Verified Solution
When the United States imposes tariffs on imported goods, foreign countries may retaliate by imposing tariffs on goods exported by the United States. Thus, there is a decline in U.S. exports that may offset any decline in U.S. imports.