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U.S. Slaps High Tariffs On Chinese Solar Panels

749 words - 3 pages

Imports from China have a large effect on the economy of the United States of America, as they cause a decline in demand for regional goods. Chinese industries follow a strategy called sporadic dumping, where a product is sold for less than the production cost or the price of the product in the country. The article “U.S slaps high tariffs on Chinese solar panels” in The New York Times describes the attempts by the United States to prevent the failure of national companies in the solar panel industry. A tariff can be defined as a tax on imports, which is determined by the consequence of the import`s flow into the country, in order to protect local producers.
The 31 percent antidumping tariff on Chinese solar panels is essentially to prevent the expenditure of the Chinese industry in the United States. Despite the fact that solar panels are beneficial for the environment, the price would increase significantly due to the tariff. The domestic price of the solar panels will increase, along with an increase in domestic production, as the loss of foreign solar panels has to be compensated to meet the demand. However, a higher price results in a decrease in demand. As Mr Ben Santarris, who is a company spokesman, mentioned: “We consider this a bellwether case.” It underscores the importance of manufacturing to the U.S. economy.” Hence, the tariffs are beneficial to American solar panel manufacturers, as the producer surplus increases. This is demonstrated in the graph below:

PW is the price of solar panels before the tariff and S(world) demonstrates the world supply. After the introduction of the tariff on solar panels, the world supply increases to S(world)+tariff and the price to Pw+T. It can be seen that the quantity demanded decreases from Q2 to Q4 due to the increase in price. The domestic producers try to maximise profits by increasing production to Q3. This results in the revenue increasing from g to g+a+b+c+h. The supply of the Chinese solar panel firm is Q3Q4. The firm makes Pw+T, which they have to use to pay the tariff. The domestic solar panel producers will produce at an inefficient level, which is at Q1Q3. The level of production for the Chinese...

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