Quote from TM_Direct:
you forgot # 3...which is the Producer decides not to send the product overseas because of the tariff ( because he does not want to absorb it nor will the consumers in that country pay it)
and PRESTO the producers of that good have a monopoly all to themselves in their country thanks to protectionism....ie: Japan allowed in about 50 american cars last year...out of a country of 600 million....don't you think that helps toyota and Nissan and hurst Dodge and GM?? say what you want about quality yadeee yadeee but 50 cars? come on.
Basic Econ
#3 will only exist if the tariff overwhelms the margins of the foreign producer. This will generally cause HUGE problems in the US! Domestic producers were likely maintaining facitilities without huge amounts of excess capacity, because that was necessary in order to stay competitive on a world level. Immediately doubling quantity demanded from domestic suppliers would cause prices to skyrocket. This could potentially cause bankruptcy of suppliers without enough cash on hand.
Also, prices would likely jump enough to make it profitable for foreign suppliers to get back into the game, even with a tariff in place. Consumers willing to pay the much higher prices would still buy. Those unwilling would simply go without. Production would slow, and American production jobs would be lost.
In regards to Japan and cars. Japanese consumers are the ones who are hurt by the ban on American autos. Prices would drop significantly if they allowed US cars.
Of course, if Japan allows US cars, then our prices for GM and Ford would increase domestically.