00:01
So here we have an event that's a tariff on steel, right? a tariff on steel.
00:08
And we have to think about how that's going to affect the auto industry.
00:11
So first of all, the question tells us that this is going to imply higher steel prices, right? but we should think about why that happens for a moment.
00:21
What is a tariff? a tariff is a tax on goods coming into the country.
00:26
So when automakers import steel, they're going to pay a high.
00:30
Higher price because they have to pay the price of steel and tax, right? of course, how much of the tax they pay depends on elasticity and tax incidents and all that other lovely stuff.
00:40
But this tax is going to make imported steel more expensive.
00:44
But it doesn't affect american steel.
00:45
So why don't we just buy the relatively cheaper american steel, right? presumably, this assumes there's some limit on american steel production, right? the supply curve for american steel, must be upward sloping because if american steel could produce an infinite amount of steel at a fixed price, when imported steel was taxed, domestic automobile manufacturers would just go and buy the american steel.
01:15
So it must be there's some limit to american steel supply, right? that's driving up the price of steel, not just imported steel, domestic steel...