Firms can take several approaches to lessening price escalation such as lowering costs by manufacturing in lower-cost countries, eliminating expensive features, or lowering quality; lowering tariffs by repackaging products or modifying them to qualify for lower rates; designing shorter distribution channels with fewer middlemen to reduce markup; using foreign trade zones for tax elimination; or dumping goods at marginal cost prices below home market prices.

1. Approaches to Lessening
Price Escalation
Lowering Cost of Goods: Firms can lower costs by
eliminating costly features in products or by
manufacturing products in countries where labor costs are
cheaper
-Manufacturing in a third country
-Eliminating costly functional features
-Lowering overall product quality
Lowering Tariffs: Firms can lower prices by categorizing
products in classifications where the tariffs are lower
-Repackaging

2. Modify product to qualify for a lower tariff rate within classification
Lowering Distribution Costs: Firms can design channels that are
shorter, have fewer middlemen, and by reducing or eliminating
middleman markup
– Shorter channels
– Reducing or eliminating middlemen
Using Foreign Trade Zones: Firms can manufacture products in free
trade zones where the incentive offered is the elimination of local
taxes, which keep prices down
Dumping
– Use of marginal cost pricing
– Selling goods in foreign country below the price of the same
goods in the home market