… is from page 82 of Anne Krueger’s 2020 book, International Trade: What Everyone Needs to Know:
When tariffs are imposed on goods that are used in the production of both domestic final goods and exportable items, the tariff can improve the foreign producers’ position relative to their US competitors because the foreign producers pay a lower price for their inputs. For example, when the tariff was put on American steel imports, foreigners could obtain steel at a price equal to, or lower than, the US domestic price of steel.
American producers of steel-using goods such as tractors, refrigerators, and washing machines then found that their foreign competitors’ costs had fallen while theirs had risen. The result was a reduction in American producers’ share of foreign markets and an increase in the share of foreign producers in US markets.
DBx: Yep. And – to be clear – what Krueger means when she writes that U.S. producers of tariffed inputs “found that their foreign competitors’ costs had fallen while theirs had risen,” she means that the U.S. tariffs raised U.S. producers’ costs of production relative to the costs of production of their foreign competitors.
