Assignment: International Trade

The US Government is thinking to establish a 20% tariff to goods being imported from Mexico to reduce the trade deficit.

Draw a Supply and Demand graph for a specific product (a certain car, avocados, salsa, etc.). There is information in Internet in websites related to NAFTA.

In the same graph, indicate:

a. The price before and after the tariff
b. The quantities supplied and demanded before and after the tariff.
c. Consumer surplus, producer surplus and deadweight before and after the tariff.
d. Possible income for the US Government (taxes paid).
e. Who wins, who loses?
f. Possible reactions from all those affected by this economic policy.