An Example of Free Trade Versus Tariffs
The United States recently imposed tariffs on products coming from Mexico. Let's look at the difference between free trade and protectionism (tariffs) and the effect on the consumer.
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Watermelon
It is spring time in North America and a time for picnics. A favorite at any picnic is watermelon (at least it is one of my favorites). When I bought groceries today I checked the price of a seedless watermelon. The cost was $5 for a single seedless watermelon. And this was the cost before tariffs were imposed on products from Mexico.
Since locally grown watermelons are not available yet, the watermelons in the stores come from other areas. The label on the $5 seedless watermelon in the store
says it is a product of Mexico.
Toward the end of summer the locally grown watermelons will be in the stores and the price of watermelons generally goes down.
Free Trade
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With current trade agreement between Mexico and the United States, the cost of a seedless watermelon in the store is $5.
Tariffs
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The United States has now imposed a 5% tariff on all products imported from Mexico. Let's say Mexico exports seedless watermelons to the United States for $2 per seedless watermelon. At the port of entry to the United States, U.S. Customs collects a tariff of $0.10 for every seedless watermelon imported from Mexico. The tariffs collected go into the U.S. Treasury.
The cost of the tariffs is passed through the distribution system and arrives at my local store at an increased cost. So it looks like I will be paying at least 10 cents more ($5.10) for each watermelon I purchase until the locally grown watermelons are in stores.
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That was seriously very precise explanation. During reading I felt like I am thrown to my maths class in high school, where the concepts where explained using such examples.
I must say that you can turn into a great teacher!
Keep flourishing!
Hello @etcmike, here in Venezuela the prices rise constantly, but every time they do they go up to double the cost...
I really feel for the people of Venezuela. The inflation of prices there is unbelievable.
Here in the United States, according to John Williams, the true inflation rate is about 10%. I know what that feels like. A doubling of prices in a short period of time is just unimaginable to me, but I know it could happen here in the United States at some point (especially if the U.S. dollar loses world reserve currency status).
Have a great weekend!
Steem on,
Mike
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It is as always profitable, but not the people.
Well, maybe some americans will grow watermelons!
And get that 10¢ extra per melon.
oh, wait, its not worth it. You need cheap migrant labor to even break even.
Well, here in the northern United States it has been too wet to plant. Even if I planted watermelons now, they would not be ready to harvest until nearly the end of summer.
So until then, people in my state will be importing watermelons from other areas.
Have a great weekend!
Steem on,
Mike
Very much indeed.
And winter will be coming early.
So, if you slushed out there in your galoshes and planted some watermellon, you will be harvesting them small while the ground is covered in frost.
The biggest thing about the tariffs was the removal of them (back with NAFTA), that allowed factory farmed corn to get imported to Mexico killing the small farmers there.
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As watermelons are not available in your local area at present, they are imported from Mexico.
To get Mexico to curb immigration into the USA, President Trump has imposed economic sanctions on all Mexican products by introducing tariffs - 5% to begin with and rising to 25%.
The proceeds of these tariffs go straight to the USA Treasury and the cost is passed on to the consumer.
At some point, the consumer will find the price of watermelons too expensive and will not purchase them.
The result will put the Mexican watermelon grower/farmer out of business.
Eventually, the immigration from Mexico will rise substantially, especially from from watermelon farmers.
Yes, that makes perfect sense!
I have already made the decision not to purchase watermelons just yet because they are too expensive. When the watermelons grown locally come to market, I will see what the prices are then.
The tariff on watermelons may just give the local growers an incentive to raise their prices too.
There are few winners when tariffs are applied.
Have a great week!
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Mike
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* Please note you do not have to key in [] for the command to work, APR can be affected by STEEM pricesNicely explained everything in simple and short keep sharing more
everyone wants to get rich on someone else's hump
Here in Canada we are bringing up abortion laws when it doesn't have anything to do with free trade.