There have been different attempts by the U.S to limit international trade. In 1930, tariffs on all nations shipping goods to U.S were slapped by Congress in efforts of shielding its workers. Recently Ronald Trump also talked tough about the need to impose tariffs on Japan, China, and Mexico, a statement which got him cheers during his campaign rallies. Like, the supporters, most Americans have never realized how much the tariffs would cost them (Trump n.p.). This essay is a review of U.S potential attempts to limit international trade based on various questions.
In the Nominal calculation of GDP, the component of Net Export, Xn is equaled to the American exports Value minus the imports Value in dollars. The current component net value is -500 billion dollars. The net export would be an important variable in the GDP calculations of various countries. When the value of an export good is higher than the value of import goods, a nation is considered to have a positive trade balance for the given period. When considered as a whole, these, in turn, become indicators of countries’ rate of savings, future rates of exchange, and to a certain degree its self-sufficiency. Based on an AS/AD framework, an increase in AD would shift the curve to the right while a decrease would shift it to the left. An increase in the levels of general prices, P, would cause various producers to observe the increasing prices of their goods (Krol 4-7).
In my opinion, again of US manufacturing jobs and output would not outweigh the costs of restricting foreign trade. The United States exports goods that relatively use labor that is more skilled and import goods that use labor that is more relatively unskilled. When the economic adjustments occur according to change of patterns of trade, the skilled labor demand increases as that for unskilled labor goes down. If the Unite States would open up its economy to international trade, wages for skilled labor would increase about that of unskilled labor. The complication of matters would create more challenges for laborers who are unskilled.
Figure 3: Growth of U.S Employment and Imports, 1987–2007, Economic Report of the President, 2008; Bureau of Labor Statistics; and U.S. Department of Commerce.
The displaced would also experience unemployment periods before finding new jobs. Various research studies aimed at investigating how international trade affects wages and employment established that, despite the existence of public rhetoric, trade internationally would have a relatively little impact on employment and wages in America. The growth of inequality of wages over the past twenty-five years has been mostly driven by the changes in international technology than trade.
Again, in my opinion, it would be better for the US to stand pat and encourage open and free trade among all nations. This is because trade among all countries would enable each of the countries to specialize in the commodity production whereby it would enjoy unique advantages. In the absence of international trade, every nation would produce all goods it would need regardless of the costs. The open trade would also lead to equality of prices of goods and production factors in all trade regions globally. The open and free trade would be the only a true and fair trade since it would offer the consumers most choices and great opportunities of improving their living standards. It would also create a competitive environment, full of innovation and developments of better products and more services and goods. It would also keep low prices and high quality so as to increase and retain the market shares.
In my view,it would also be better for the US to stand and encourage open and free trade since it would spur innovation as evidenced by the electronic business developments.
Figure 4. Factors driving Global Trade. Source: Scott L. Baier and Jeffrey H. Bergstrand, “The Growth of World Trade: Tariffs, Transport Costs, and Income Similarity,” Journal of International Economics 9, no. 4 (2001)
The US should stand since it would contribute to the different factors of global trade growth .According to figure four there is an attribute of 67% of an increase in trade internationally to growth of income, 25 % of the reduction tariffs, and the rest of 8% to the decreasing cost of transportation. There are much trade critics putting blame on trading agreements for the spurring of competition globally despite the fact that most growing trade rises from the increasing incomes worldwide. US reversion to the stand of protectionism would never stop the global trade growth, but would have the economic benefits of open competitions sacrificed (Krol 4-7).
It would also be better for the US to encourage the free trade since boosting tariffs would never be a great deal for the Americans, especially the poor. They would cost an average household $2,200 per year, or 4 percent of after-tax incomes. In regards to recent studies by non-profit National Foundation for American Policy, this would be major because the imports under the policy of Trump would be extra expensive, causing a rise in the price of American made competing goods by 11 percent. This would levy effectively consumption taxes on the purchases and would cut into the shoppers’ incomes (Krol 4-7).
Krol, Robert. Trade, Protectionism, and the US Economy: Examining the Evidence. Center for Trade Policy Studies, Cato Institute, 2008. 4-7
Trump Has Repeatedly Said America Has Been on the Losing End of Trade Deals for Years. In His View. “Trump’s Tariffs Will Cost Americans Thousands, Report Says.” CNNMoney. Cable News Network, n.d. Web. 12 July 2016.