In 2022 the US congress passed, and the US president signed the inflation reduction act. Besides other measures, the act also provides protection/subsides to US firms. Read below quotation from an article published on this topic. "To qualify for the act's tax credit of up to $7,500 on the purchase of an electric vehicle (EV), the vehicle's battery must be made of minerals and components mostly extracted and produced in America, or otherwise in a country with which the US has an explicit free trade agreement. This provision excludes the output of many countries, including those in Europe, which can mine and produce the needed minerals and components at lower costs than American companies can". The above US act obviously is an example of strategic trade policy of supporting domestic firms (Arshad's comment). "Naturally, the provision has angered many member nations of the European Union, with some warning of "tit for tat" retaliatory restrictions or subsidies to punish American industries. A joint task force comprising US and EU representatives met Dec. 5 to attempt to address this issue". Write a short summary of 2 pages (handwritten) clearly outlining the following with logical reasoning and references to literature. 1. What could be the costs and benefits of this policy to American producers (EV firms) and buyers. Clearly describe and JUSTIFY your answer. 2. What could be the positive and/or negative consequences of this for European (or any Non-US) producer and consumer? 3. What can you expect the overall impact on the given industry (EV) firms, consumers and prices.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In 2022 the US congress passed, and the US president signed the inflation reduction act. Besides other measures, the act also provides protection/subsides to US firms. Read below quotation from an article published on this topic. "To qualify for the act's tax credit of up to $7,500 on the purchase of an electric vehicle (EV), the vehicle's battery must be made of minerals and components mostly extracted and produced in America, or otherwise in a country with which the US has an explicit free trade agreement. This provision excludes the output of many countries, including those in Europe, which can mine and produce the needed minerals and components at lower costs than American companies can" "Naturally, the provision has angered many member nations of the European Union, with some warning of "tit for tat" retaliatory restrictions or subsidies to punish American industries. A joint task force comprising US and EU representatives met Dec. 5 to attempt to address this issue". Write a short summary of 2 pages (handwritten) clearly outlining the following with logical reasoning and references to literature. 1. What could be the costs and benefits of this policy to American producers (EV firms) and buyers. Clearly describe and JUSTIFY your answer. 2. What could be the positive and/or negative consequences of this for European (or any Non-US) producer and consumer? 3. What can you expect the overall impact on the given industry (EV) firms, consumers and prices.

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