Answer:
Trade situation is a win-win game for US consumers as well as US producers and for all the whole world.
Since China is producing cheaper shoes which means US consumers will be gain from Chinese import at a reduced cost and that will result in higher consumer surplus. But because of the tariff, US consumers are at a disadvantage. Due to free trade agreement between US and Mexico, Chinese producers lost as their is tariff in their product which make it to be uncompetitive.
Explanation:
Looking at the difference between importation cost from both Mexico and China,
I.e Consumer Price of Mexican shoes - Consumer Price of Chinese Shoes = $30 - $25 = $5
Which means US consumers are paying $5 extra for Mexican import than Chinese import without tariff
For Chinese product
With the tariff, US consumers were paying ( 1 million * $10 ) = $10 million
Net consumer surplus is -$10 million USD.
For Mexican product
1.2 million * $5 = $6 million
Net Gain
$10 million - $6 million = $4 million.
The Net losses for US Sellers is $6 million
US government is losing all its tariff because of the free trade agreement resulting from Mexican import
1 million * $10 = 10 million
Trade situation is a win-win game for US consumers as well as US producers and for all the whole world.
Since China is producing cheaper shoes which means US consumers will be gain from Chinese import at a reduced cost and that will result in higher consumer surplus. But because of the tariff, US consumers are at a disadvantage. Due to free trade agreement between US and Mexico, Chinese producers lost as their is tariff in their product which make it to be uncompetitive.
