Tariff wars: Context-rich problem

Rebecca L Moryl, Emmanuel College
This material was originally created for Starting Point: Teaching Economics
and is replicated here as part of the SERC Pedagogic Service.

Summary

In this activity, students listen to a podcast discussing a potential trade war between China and the U.S. Students consider one (or more) possible reflection/discussion prompts to discuss in class or complete a written assignment regarding tariffs, free trade vs. protectionism and the interaction of politics and economics. An additional extension for in or out of class projects is provided.

Learning Goals

Students will be able to consider the impacts of tariffs in a real life setting.

Context for Use

This problem could be used to introduce the economics of tariffs in a principles of microeconomics course. It could be adapted to in-class discussion (10-15 minutes), written assignment, or online discussion. Students in an upper-level class (international economics, trade policy course) might find this a useful starting point for considering the complexity of tariffs and trade policy in the international political context.

Description and Teaching Materials

Listen to the Planet Money podcast, Revenge of the Tariffs (available at: http://www.npr.org/blogs/money/2009/09/podcast_1.html), which discusses a potential U.S. tariff on Chinese tires. You live in a state whose economy relies heavily on the automobile industry. Using your economic reasoning, write a letter to the editor of your local newspaper presenting your position on this proposal.
Tariff Wars instructor guide (Acrobat (PDF) 352kB Jul31 16)



Teaching Notes and Tips

Students will need to have discussed trade, tariffs, consumer surplus and producer surplus before completing this activity.
Students will need to listen to the podcast on their own before beginning the activity. The full podcast is 19 minutes in length.
This problem can be used to assess students' understanding of the effects of a tariff on economic surplus. Students should be able to describe how imposition of a tariff would impact consumer surplus, producer surplus and would create deadweight loss. Students could also consider the political complexities of international trade.
If your students are new to context-rich problems, it may be helpful to include additional prompts to guide students, such as "How will consumers be impacted by this tariff?" "How will producers be impacted by this tariff" "Why would China propose a retaliatory tariff on goods in a different market? What impact do you think that action might have on consumers/producers in those markets?"

Assessment

If the problem will be graded, a rubric such as the following might be used:
- Grade=A: All economic reasoning in the answer is correct. All relevant graphs are included. All relevant economic terms are included. May have 1-2 minor mistakes, such as a missing label on a graph.
- Grade=B: Economic reasoning in the answer is correct, but some relevant economic terms are missing or graphs contain minor mistakes.
- Grade=C: Contains significant errors in the economic reasoning. Many relevant economic terms are missing or used incorrectly. Graphs contain some significant errors.
- Grade=D: Very little of the economic reasoning is correct and relevant to the problem. Nearly all relevant economic terms are missing or used incorrectly. Graphs are missing or contain several significant errors.
- Grade=F: None of the economic content is relevant to the question.

References and Resources

Planet Money Podcast: Students will need to listen to this podcast
http://www.npr.org/blogs/money/2009/09/podcast_1.html

Harmonized Tariff Schedule: Instructors may want to reference this document if they choose to use this problem for upper level classes, or with the suggested prompt three: http://www.usitc.gov/tata/hts/bychapter/index.htm

Harmonized Tariff Schedule Chapter 40: This chapter is referenced in the Prompt Three Option:
http://www.usitc.gov/tata/hts/bychapter/index.htm