Will manufacturing businesses always benefit from the introduction of import tariffs? Justify your answer.
CAMBRIDGE
O level and GCSE
Year Examined
February/March 2023
Topic
International Trade
👑Complete Model Essay
Do Manufacturing Businesses Always Benefit from Import Tariffs?
Import tariffs are taxes imposed on goods entering a country. While they might seem beneficial to domestic manufacturing at first glance, the reality is more nuanced. This essay will explore both the potential benefits and drawbacks of import tariffs for manufacturing businesses.
Potential Benefits
One potential benefit is the increased price of imported finished goods. When foreign-made products become more expensive due to tariffs, consumers might turn towards locally produced alternatives. This can lead to increased demand for domestic manufacturers, boosting their sales and revenue. For example, if tariffs make imported cars significantly more expensive, consumers might opt for domestically manufactured vehicles instead.
Drawbacks and Limitations
However, import tariffs can also negatively impact manufacturing businesses. A significant drawback is the increased cost of importing raw materials. Many manufacturing processes rely on imported components, and tariffs make these inputs more expensive. This can squeeze profit margins and force businesses to raise prices, potentially making them less competitive. A furniture manufacturer reliant on imported timber might face higher costs and reduced profitability if tariffs are imposed on wood imports.
Furthermore, retaliatory tariffs imposed by other countries can harm businesses that export their products. If a country imposes tariffs on goods from another, the affected country might respond with its own tariffs. This can make it harder for domestic manufacturers to sell their goods abroad, impacting their revenue and potentially leading to job losses. For instance, if a country imposes tariffs on steel imports, other countries might retaliate with tariffs on machinery exports, hurting domestic machinery manufacturers.
Conclusion
In conclusion, while import tariffs might offer some benefits to manufacturing businesses by potentially increasing demand for locally produced goods, they also present significant drawbacks. The increased cost of imported raw materials and the risk of retaliatory tariffs can negatively impact profitability and competitiveness. Whether a manufacturing business benefits from import tariffs depends on various factors, particularly the proportion of imported raw materials used in production and the availability of local alternatives. Ultimately, a nuanced approach considering both the potential benefits and drawbacks is crucial when assessing the impact of import tariffs on manufacturing businesses.
Will manufacturing businesses always benefit from the introduction of import tariffs? Justify your answer.
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Do Manufacturing Businesses Always Benefit from Import Tariffs?
Import tariffs are taxes imposed on goods entering a country. While they might seem beneficial to domestic manufacturing at first glance, the reality is more nuanced. This essay will explore both the potential benefits and drawbacks of import tariffs for manufacturing businesses.
Potential Benefits
One potential benefit is the increased price of imported finished goods. When foreign-made products become more expensive due to tariffs, consumers might turn towards locally produced alternatives. This can lead to increased demand for domestic manufacturers, boosting their sales and revenue. For example, if tariffs make imported cars significantly more expensive, consumers might opt for domestically manufactured vehicles instead.
Drawbacks and Limitations
However, import tariffs can also negatively impact manufacturing businesses. A significant drawback is the increased cost of importing raw materials. Many manufacturing processes rely on imported components, and tariffs make these inputs more expensive. This can squeeze profit margins and force businesses to raise prices, potentially making them less competitive. A furniture manufacturer reliant on imported timber might face higher costs and reduced profitability if tariffs are imposed on wood imports.
Furthermore, retaliatory tariffs imposed by other countries can harm businesses that export their products. If a country imposes tariffs on goods from another, the affected country might respond with its own tariffs. This can make it harder for domestic manufacturers to sell their goods abroad, impacting their revenue and potentially leading to job losses. For instance, if a country imposes tariffs on steel imports, other countries might retaliate with tariffs on machinery exports, hurting domestic machinery manufacturers.
Conclusion
In conclusion, while import tariffs might offer some benefits to manufacturing businesses by potentially increasing demand for locally produced goods, they also present significant drawbacks. The increased cost of imported raw materials and the risk of retaliatory tariffs can negatively impact profitability and competitiveness. Whether a manufacturing business benefits from import tariffs depends on various factors, particularly the proportion of imported raw materials used in production and the availability of local alternatives. Ultimately, a nuanced approach considering both the potential benefits and drawbacks is crucial when assessing the impact of import tariffs on manufacturing businesses.
Extracts from Mark Schemes
Do you think manufacturing businesses will always benefit from the introduction of import tariffs? Justify your answer.
Award up to 2 marks for identification of relevant points.
Award up to 2 marks for relevant development of points.
Award up to 2 marks for a justified decision as to whether manufacturing businesses will always benefit from the introduction of import tariffs.
Points might include:
- Higher costs of importing raw materials [k] which could lead to higher prices / lower its profit margin / so may need to find new suppliers locally [an]
- May increase price of imported finished goods / imported goods more expensive [k] which may lead to fewer sales / less revenue / less imports/increase demand for locally made goods [an]
- Other countries may retaliate/introduce import tariffs [k] making it more difficult to export [an]
- Other appropriate responses should also be credited.
Justification might include:
Imported goods will become more expensive [k] leading to fewer sales [an]. However, businesses have higher costs if they are importing raw materials [k] which could lead to an increase in prices [an]. Overall, whether businesses benefit is likely to depend on the proportion of raw materials which are imported [eval], especially if there are no alternative local suppliers it is more likely to be negatively affected [eval].
This is a general question so there are no marks for application.