The Involvement in the Manufacturing Industry and High Rates of Research Paper - 4

The Involvement in the Manufacturing Industry and High Rates of Joblessness - Research Paper Example Trade between two economies is very sensitive to the slightest changes in understanding. It is factual that the cost of tyre production in China is lower than that in America. This enables the sales of Chinese tires at affordable prices while still making profits. Furthermore, some American firms have established their tyre manufacturing industries in China to benefit from the least cost of production (Mankiw et al. 165). This implies that the imposition of the trade tariffs cannot be effective without an equal disruption of the American investors in China. On the other hand, the imposition of specific tariffs for partner countries arouses diplomatic questions on the legitimacy of the protective approach to trading. During the accession of China to the World Trade Organization, it ratified the agreement that gave a loophole for such unprecedented tariffs. This ratification gave room for The protectionist measures undertaken by the American government translates into mere political posturing without any substantial positive effects on trade (Sutter 214). This scenario may escalate into a trade war and inflict a serious economic slump on both the American and Chinese economies. The spill of the trade row may necessitate equal invocation of key agreements such as the anti-dumping policy for the American goods by the Chinese government. Setting the tariffs on Chinese rubber tires at 35% may have appeared plausible for the American government since the world trade organization had preferred a 55% tariff. However, as it turns out, this form of protectionism in the end only incurs expenses to the American economy overly.