Why 25% instead of 10%? That’s twice of the initial tariff level!
On July 10 2018, Trump seeked to impose 10% on thousands of Chinese imports. While the tariffs would not be imposed until after a period of public comment, the proposed level was then raised to 25% by Trump – this could escalate the trade dispute between the world’s two biggest economies.
Economically speaking, we know that by raising its tariff to a higher level simply serves as a motivation to motivate domestic producers to increase production of their output. This results in higher consumer prices, higher producer revenues and profits, and higher government revenues which make tariffs a way to make transaction from consumers to government treasuries effectively.
However, having tariffs begets strong consequences: 1) Cost of production for American companies increases 2) China will retaliate in response.