Essay Sample on Trump's Tariffs Impact Steel: Essay Sample

Introduction

Trump intends to make America great again. To achieve this, he wants to introduce tariffs on steel and aluminum imports. The following is an analysis of the trump's order on some of the affected parties.

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Tariff Impact on Steel

After the introduction of the tariffs, the price of steel rose. However, it fell later due to a fall in demand by local producers as they sought an alternative to steel(Entin & Jonathan). The initial price jump, increased production. Therefore, increasing supply, coupled with the reduced demand for steel, resulted in a price fall. As steel prices fall, steel manufacturers have reduced employee numbers to protect their profits. Steelworker's unemployment numbers are also increasing due automation of steel industries and the use of steel alternatives.

Figure 1:Graphical representation of steel prices Figure 2: steelworkers

Toyota Automobile Production

Before the Tariffs by resident Trump, Toyota production numbers were on the rise. However, tariffs have led to a gradual decline due to an increase in the price of imported parts(Shingo and Bodek). Reduced production in Toyota plants has led to the reduction of employees through layoff and attrition. Employee numbers are also affected by mechanization efforts by the company. The loser of the trade war is the American consumer. They have had to pay more for products, and a fall in production has led to fewer options in the market. Toyota has had to cover the cost of the tariffs as a measure of cushioning consumers and ensuring that products remain competitive in the market

Figure 3: Toyota production Figure 4: Toyota employee numbers

Harley-Davidson Motorcycles

Harley-Davidson motorcycles have the majority of its parts produced, within the United States of America. Therefore, the introduction of tariffs had a significant impact on its production and employee numbers(Alavian et, al). In 2018, the country spent forty million US Dollars to cover the cost of tariffs. American tariffs on steel and aluminum cost the company twenty million dollars, European Union tariffs on American products cost the company more than twenty million dollars. This effect has made the company shift production of some products to Asia. Asian products are exempt from tariffs in the European Union. Due to the change in production, the company has had fewer production numbers, with employee numbers shrinking.

Figure 5: Harley-Davidson production Figure 6: Harley-Davidson employees

Price Discrimination

Price discrimination involves having different prices for a product. There are three types of price discrimination. These are first degree, second degree, and third degree. The first degree allows a producer to sell each unit at a different price for every consumer(Bonatti & Cisternas). This policy allows the company to maximize consumer surplus. The second degree enables a company to offer various rates according to the quantity bought. For example, it may offer discounts to large purchases. The third degree involves offering prices according to the consumer groups. For example, providing different park entry fees according to age is third-degree price discrimination.

Tying the price of a drug to its effectiveness is similar to price discrimination. The following is an analysis of price discrimination conditions and how the pricing of drugs relates to each state.

Price discrimination occurs when a firm markets the same product to different sections of the market. These could be either households or business users. According to Loftus and Pauly, some cancer drugs treat different strains of cancer. The effectiveness of the drug will vary according to the disease the patient is suffering. Therefore, the existence of various cancers creates different markets for the drug.

Besides, each of the market divisions should have different price elasticity. Price elasticity is a measure of how consumers react to price change. In the case of drugs, a drop in the price of a drug will increase consumption. However, if the drug is not effective in treating a cancer strain, a price fall will not increase demand.

These markets should be separate by either time, usage, or geographically. An example of this separation is online shops that vary prices over a period. Differentiation of drugs, according to usage, considers the target of each drug. A medication may have the ability to combat several illnesses. However, a doctor may prescribe an ineffective medicine due to other factors such as allergies. Cancer drugs are in hospitals countrywide; this creates a geographical use, which allows drug manufacturers to offer different prices.

For price discrimination to occur, the markets under consideration should not have leakage. Therefore, if a buyer acquires a product at a low price, they should not have the ability to sell it at a higher price in a different market. Drug dosage varies with each patient. Therefore, a patient can't sell drugs to another patient.

Finally, the company should exercise some degree of monopoly. Few drug manufacturers can produce cancer drugs. Additionally, most drug manufacturers have patents on their medications. These conditions create a monopoly. Therefore, the pharmaceuticals can offer different prices without fear of a competitor benefiting.

Works Cited

Alavian, Pooya, et al. "Smart production systems: automating decision-making in manufacturing environment." International Journal of Production Research, vol. 58, no. 3, 2019, pp. 828-845.

Bonatti, Alessandro, and Gonzalo Cisternas. "Consumer Scores and Price Discrimination." The Review of Economic Studies, vol. 87, no. 2, 2019, pp. 750-791.

Chevalier, Judith A., and Anil K. Kashyap. "Best Prices: Price Discrimination and Consumer Substitution." American Economic Journal: Economic Policy, vol. 11, no. 1, 2019, pp. 126-159.

Entin, and L. Jonathan. "The Constitutional Challenge to the New Tariffs on Steel and Aluminum Imports." Journal of Taxation of Investments, vol. 36.2, 2019.

Kleiner, Andreas, and Alejandro Manelli. "Strong Duality in Monopoly Pricing." Econometrica, vol. 87, no. 4, 2019, pp. 1391-1396.

Shingo, Shigeo, and Norman Bodek. "A Study of the Toyota Production System From an Industrial Engineering Viewpoint." 2019.