Question

Discuss a set of trade barriers that exist in the United States and the impact it has on our economy.

Answer 1

Trade barriers, such as tariffs, have been demonstrated to cause more economic harm than benefit; they raise prices and reduce availability of goods and services, thus resulting, on net, in lower income, reduced employment, and lower economic output. Since the end of World War II, the world has largely moved away from protectionist trade policies toward a rules-based, open trading system. This widespread reduction in trade barriers has contributed to economic prosperity in many ways, including large increases in trade activity and accompanying gains in economic output and income.

Tariffs are a type of excise tax levied on goods produced outside of the country at the time of import. They are intended to increase the consumption of goods produced at home, by increasing the price of goods produced from abroad. Tariffs generally result in consumers paying more for goods than they would otherwise have, in order to support domestic industries. Although tariffs can afford some short-term protection for domestic industries producing the tariffed goods by shielding competition, they do so at the expense of others in the economy, including consumers and other industries.

Trade helps nations to be skilled in activities in which they have a competitive advantage; that is, what they can produce at a comparatively lower cost of opportunity, and exchange for what they would otherwise have to produce at a higher cost of opportunity. This means nations produce more goods and services for less, and exchange them for other countries' goods and services, resulting in higher levels of consumption than would be possible without commerce.

Trade clearly results in positive economic results, allowing people in different countries to specialize in what they do best and then to exchange physical goods, services , and financial assets across borders. But there are often misunderstandings about the measurements that economists and policy-makers use to track trade flows. The system of balance of payments consists of the current account, which measures the flow of goods and services, and the capital account, which records the flow of finance. Walking through an example of an importing and exporting company is helpful to understand how the balance-of - payments mechanism functions.