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Chinese Imports

Oct 23, 2011 • Businesses, Demand, Supply, and Markets, Developing Economies, Economic Debates, Economic History, Government, Households, International Trade and Finance, Labor, Macroeconomic Measurement, Thinking Economically • 207 Views    No Comments

Are you paying more for your clothing?

According to NY Times financial journalist Floyd Norris, women’s shirt prices, dresses, sweaters, all that government statisticians consider female “outerwear,” have started to become more expensive. Meanwhile, the women’s “underwear” category reflects a 7.8% annual price spike since 2007.

Explaining the price rise, Mr. Norris suggests that the era of cheap Chinese imports might be coming to an end. And, if it is, the low prices that buoyed our purchasing power during the past 20 years will no longer elevate our standard of living.

The Economic Lesson

Let’s assume that changes in the Chinese economy such as higher wages continue to nudge their export prices upward. And, what if the U.S. Congress successfully pressures the administration to support tariffs on Chinese goods because the yuan is undervalued? Some would say that the inflationary impact is a minus but that tariffs on Chinese goods would lead to additional jobs.

An Economic Question: Do you agree with this 2004 paper from former Federal Reserve Vice Chairman Roger Ferguson that says even with the jobs disruption, cheap imports are much more of an economic benefit than tariffs?

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