Tariffs Reduce International Trade

Steps:

• Tariffs are taxes on imports, raising the price of German cars and motorcycles in the US.
• Higher prices make these imports less competitive against domestic alternatives.
• US consumers buy fewer German vehicles due to increased costs.
• Overall trade volume between the US and Germany declines as imports drop.

Why B is correct:

• Tariffs act as trade barriers, reducing import quantities and thus bilateral trade flows, per basic international trade theory.

Why the others are wrong:

• A: Tariffs raise US prices for imported goods, potentially increasing inflation, not decreasing it in either country.
• C: German producers face lower US sales and revenues, decreasing their profits.
• D: Higher consumer prices and trade distortions lower efficiency, reducing standards of living in both nations.

Final answer: B