Recent moves to prevent Chinese furniture being "dumped" on to the American market illustrate how imposing new trade barriers may increase the cost of imports temporarily, but are ultimately futile because competitive producers always win out.
A group of furniture manufacturers lobbied the Department of Commerce and the U.S. International Trade Commission to prevent Chinese furniture manufacturers from selling their products in the U.S. The American furniture prevailed temporarily when tariffs ranging from 4 per cent to 198 per cent were imposed on Chinese imports. Some Chinese producers were able to withstand the increased costs of trade, and the others adapted to the new tariffs by moving their production sites to other countries (Vietnam).
The market for U.S. furniture is now more competitive than ever, with better jobs in more markets and cheaper products for American, which is good for everyone besides the group of American furniture manufacturers who lobbied for protection in the first place.
The logical next step would be for the Americans to get rid of the original restrictions.
But in the current economic climate, the group of American producers is likely to lobby intensively for more trade restrictions with China and new ones imposed on the Vietnamese.
That would make everyone worse off.
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