Before 1995, the United States imposed tariffs on goods imported from Mexico and Mexico imposed tariffs on goods imported from the United States. In 1995, Mexico joined NAFTA. U.S. tariffs on imports from Mexico and Mexican tariffs on imports from the United States are gradually being removed.
1. Explain how the price that U.S. consumers pay for goods imported from Mexico and the quantity of U.S. imports from Mexico have changed. Who, in the United States, are the winners and losers from this free trade?
2. Explain how the quantity of U.S. exports to Mexico and the U.S. government’s tariff revenue from trade with Mexico have changed. 3. Suppose that this year, tomato growers in Florida lobby the U.S. government to impose an import quota on Mexican tomatoes. Explain who, in the United States, would gain and who would lose from such a quota.