Question

You are an employee of a U.S. firm that produces personal computers in Thailand and then exports them to the United States and other countries for sale. The personal computers were originally produced in Thailand to take advantage of relatively low labor costs and a skilled workforce. Other possible locations considered at the time were Malaysia and Hong Kong. The U.S. government decides to impose punitive 100 percent ad valorem tariffs on imports of computers from Thailand to punish the country for administrative trade barriers that restrict U.S. exports to Thailand. How should your firm respond? What does this tell you about the use of targeted trade barriers?

Answer 1

The U.S. government decides to impose punitive 100 percent ad valorem tariffs on imports of computers from Thailand to punish the country for administrative trade barriers that restrict U.S. exports to Thailand-Such targeted trade barriers can often be easily circumvented without having to locate production facilities in an expensive country like the U.S.

Explanation:

• As long as their is no change in the  manufacturing requirements the company can  consider  Malaysia or Hong Kong  for production of Personal computers.

• Lowering the price of the goods but if you guarantee quality good at a better price then all the trade markets will vie for your attention

• Also exporting the personal computer to Canada or nearby market can be an alternative option

Hence such targeted trade barriers can often be easily circumvented without having to locate production facilities in an expensive country like the U.S.