Tariffs succeed long-term if domestic supply expands to replace imports

Steps:

• Tariffs raise prices of imported manufactured goods, reducing import demand.
• Higher domestic prices from tariffs incentivize local production of substitutes.
• Elastic domestic supply allows quick increase in output to meet demand.
• Resulting import substitution narrows the trade deficit over time.

Why D is correct:

• Elastic supply means quantity supplied rises significantly with price increases (from the law of supply), enabling domestic goods to replace imports and balance trade.

Why the others are wrong:

• A: Sustainable raw material imports address inputs, not manufactured goods substitution for deficit reduction.
• B: High inflation erodes competitiveness, making tariffs less effective at boosting exports or curbing imports.
• C: Inelastic import demand means quantity imported falls little despite higher prices, failing to reduce deficit.

Final answer: D