the president is considering placing a tariff on the import of japanese luxury cars. Using the model presented in this chapter, discuss the economics and politics of such a policy. In particular, how would the policy affect the U. S. trade deficit

In the clarification portion below, the definition of the list of questions is mentioned.

Explanation:

The premium car tariff will have little effect on net exporting as it does not affect national savings or spending. However, reducing U.S. demand for auto component imports, it will change the NX curve. This move in the curve would improve the number of trade. There will be no shift in net exports since the value of all exporters and importers will decrease by the same level. The conceptual consequences of this approach are therefore significant. On the industrial side, the elevated exchange rate raises shipments and places strain on American companies' profits, except for American tariff-shielded premium car production. The stronger currency would also affect American export markets, making their import duties increasingly costly towards foreign nations.The tariffs would harm buyers of Japanese luxury vehicles, while all other customers would benefit from either the valued currency, which helps them to buy products at a lower cost.

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