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10 May 2019  (569 Views) 

Dealing with sudden tariff
The sudden imposition of a new tariff or a large increase in the tariff can cause a big disruption to exporters of the target country. 

When the US increases the tariff on imports from China, the exporters will be affected and the impact may be serious. Some may face insolvency. They may have to impose a large scale retrenchment of its workers. 

The govt of the affected country can help the exporters to cope with this sudden and major disruption and reduce the impact on employment and business. 

This is how it can be done.

a) The govt can provide low cost financing to the affected business for a certain period that is needed for them to make the adjustment. This will allow the business to reduce the price to negate the reduce of the tariff on the production that have already been committed. The exporter can reduce the future production.

b) The amount of the financing can be tied to the amount of the tariff that has to be paid. 

If this kind of financial assistance is made available, the impact of the tariff can be reduced and the exporter can have the time to find new markets or reduce their production.

I hope that the China govt can implement suitable relief measure and it can be used as a model for other countries that are affected by this kind of major disruption.

Tan Kin Lian

Vote - should the govt help exporters to adjust to the painful disruption?


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