China is a big market for computers. While the expected demand QCHN is unknown, you know that you can charge PCHN = $450 per computer. What is the best way to organize production for the U.S. and Chinese markets? What is the minimum level of QCHN that would justify your Chinese operations?
Now suppose that you learn about the recent escalation of the trade war between the U.S. and China. The welfare of both countries was estimated at 10 (all units are denominated in millions) under free trade. When both decide on imposing import tariffs (i.e. a specific tariff of $10 per computer component and $50 per computer for the assembled computer), both are expected to experience a welfare loss (-10). In the event of only one country imposing high tariffs (and the other does not), the estimated welfare of this country with protectionist measures would be 40 while the other country suffers a welfare loss (-30).