Some suggest that we have entered into a new era of global protectionism. Develop an argument...

Some suggest that we have entered into a new era of global protectionism. Develop an argument about why this can be a good thing. What are some trade tools being used today to support protectionism? Who wins and who loses? [This is a Short Answer prompt.]

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Expert Solution

Answer) presently the world is facing a trade war between the United States and China. Both the economies have imposed hefty tariff duties upon one another.

The United States cites China as a currency manipulator who engages in artificial devaluation of the currency. The United States has a trade deficit with China. Having a trade deficit is not always bad. As trade deficit could incur due to cheap inputs from China. It is much beneficial for the United States to import cheap labour goods rather than producing domestically.

Although the balance of trade is in deficit but the United States has a capital account surplus which assures that the balance of payment is in equilibrium. Having a trade deficit in the short run is fine but if this deficit prevails in the long run then it could be harmful for the economy.

The present tariff barriers in the United States assures:

Protection of domestic producers.
Import substitution strategy
Improve the terms of trade.
Improve the balance of payment.

Rahul Sunny answered 1 year ago

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