According to this graph, when the price of T-shirts with a tariff rises above the world price, there is a increase in the quantity of shirts supplied and a decrease in the quantity of shirts demanded.

We can see that consumer surplus decreases as a result of the tariff, as the overall area under the demand curve and over the world price decreases.

The price in the domestic market rises from world price to (world price + tariff), which means that consumers must now pay higher prices and end up buying fewer goods overall.

As for the producer surplus, when the tariff is introduced, domestic producers gain from selling higher prices and producing more, increasing their surplus.

Deadweight loss results from some consumers who would have bought the product at a lower price but will no longer buy it due to the higher price after the tariff.

Similarly, domestic producers expand their production to replace these imports, however, this additional production often comes from higher-cost providers who are less efficient than the foreign suppliers they replace.

Tariffs essentially are taxes imposed on imported goods

The basics of supply and demand directly are impacted by tariffs, with a leftward shift on the supply curve if increased

• This will lead to an increased cost of goods as a result of higher import costs

This will also lead to increased prices that decrease consumer incentives to purchase therefore also shifting the demand curve left.

• Due to these shifts, it leads to market inefficiency creating deadweight loss.

The trade deficit did not actually decrease in 2018 from Trump's increased tariffs.

This article covers how tariffs work from a broad standpoint, and then goes into more specific impact of these policies. It covers rising prices and how consumer and company behavior will lead to these changes, and also goes into the job market and impact on trade deficit. The article employs examples from past experiments with tariffs and the impacts fueling the logic for what will happen in the present economic climate.

Overall, the article covers these topics with real world examples and clear application to the concepts discussed in class.

Deadweight loss

• In the standard equilibrium model, free trade leads to maximum efficiency in the market. A tariff imposed on this market will change the equilibrium by raising prices, decreasing consumption, and reducing imports which all lead to deadweight loss.

Higher prices for consumers

• Since this is a policy intervention, it alters the assumptions of the standard equilibrium model by introducing inefficiencies leading unequal impacts on consumers and higher prices for them.

Government Regulations

• Government regulations and taxes can impede market forces because the an implemented tariff increases the cost of goods, and decreases the amount of goods that are bought and sold

Unintended consequences

• Deadweight loss

• When the price of goods with a tariff rise above the world price, there is a decrease in the quantity of goods bought and sold in the domestic economy, which creates a deadweight loss. This deadweight loss leads to decreasing market efficiencies within the economy and is ultimately a market failure

Retaliation by trade partners

• Retaliation tariffs end up reduce exports from the imposing country which erodes the benefits domestic producers may have gained from the initial tariff

• This creates another layer of inefficiency and can even create a net loss of jobs and economic output in the sectors that were targeted by the retaliation