China...the New Steel Magnate

1. As China continues to increase production and begins to export more and more steel, depressing the global price of steel, should the US engage in more protective tariffs to help the US steel industry remain competitive? Why or why not?

Answers may vary. Instructor may want to discuss earlier protective tariffs for perspective.

2. As China continues to increase steel production, what should happen to the prices of cars and other steel-intensive products? Why?

Prices should fall, as the costs of producing those items are falling. This would be a good place to discuss economies of scale.

3. Does China’s ability to produce steel imply that it has a comparative advantage in manufacturing steel products?

No. Only that it has an apparent comparative advantage in production of steel. That doesn’t imply that it can manufacture cheaply with it...yet.

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