How would higher U. S. tariffs on Chinese imports affect its private saving, domestic investment, and government deficit?

Private Saving

With higher tariffs on Chinese imports, the prices of commodities would increase as the tariffs would be added to the prices of goods. This means that consumers would have to spend more to buy goods and services and should this happen they would have to save less if their income levels stay constant.

This would therefore reduce private saving.

Domestic Investment

With tariffs making Chinese goods more expensive, domestic companies will see the demand for their goods and services increase. This will spur new investment into domestic companies in order to capitalize on this increased demand.

Government Deficit

In the short run, the Government deficit will decrease because the revenue collected from tariffs will offset some Government spending.

In the long run however, companies would see their profits dwindle as they face higher input costs which would mean that the taxes which are the main source of Government revenue will decrease which would increase the Government deficit.

answer///supply is elastic, and demand is inelastic;