Which statement is true of tariff reductions?
A) Reciprocal tariff liberalization has quickly become widespread to support free trade.
B) Tariff reductions primarily benefit import-competing industries within a nation.
C) Tariff reductions lead to increased foreign competition that undermines the welfare of a nation.
D) Tariff reductions can increase the overall welfare of a nation when affected industries are compensated for their losses.

Question

Quizplus · Accepted Answer

Tariff reductions can lead to increased overall welfare of a nation, but it may lead to losses for some affected industries. However, these industries can be compensated for their losses through various means, such as government subsidies, so that the benefits of free trade are shared among all industries, thereby increasing the overall welfare of the nation. Reciprocal tariff liberalization is a means to achieve free trade but not the only way, and it may not always be widespread. Tariff reductions benefit not just import-competing industries but also consumers who benefit from lower-priced imports. While increased foreign competition can lead to challenges for domestic industries, it can also lead to improvements in efficiency and technological advancements, ultimately benefiting the nation's overall welfare.

Which Statement Is True of Tariff Reductions