Question

Promoting international trade is not a zero-sum game. It is a win-win proposition; both parties gain from trade.

Consider the following:

• Tariffs are paid by the citizens of the country imposing tariffs, not by the citizens of the country producing the products upon which the tariffs are levied.
• The term “trade deficits” is a misnomer. Every country’s trade is always in balance.
• Trade deficits do not mean the US no longer produces anything to export. The US is the world’s second largest manufacturer and the world’s second largest exporter of manufactured goods.
• Trade deficits reflect a strong economy. Trade deficits rise during economic expansions and fall during economic contractions. Unemployment falls as trade deficits rise and rises as trade deficits fall.
• Imports and exports are complements, not competitors. Both are necessary and both contribute to economic growth.
• Roughly one-third of all US imports and exports is trade between US multinational companies and their overseas subsidiaries.
• Foreign-owned companies operating in the US number in the thousands and provide directly or indirectly jobs for more than 13 million US workers (roughly, 10% of the US workforce).
• US trade deficit in goods in 2018 (as a % of GDP) was the same as it was 5, 10 and 15 years earlier.
• The rise in US goods trade deficit with China has not increased the US total goods trade deficit. It has been offset by reduced goods imports from other trading partners.
• There is a strong correlation between the rise in world trade and:
• The rise in world GDP
• The dramatic fall in the world’s extreme poverty rate
• The rise in world life expectancy
• For every US manufacturing job lost to trade between 2000 and 2010, seven US jobs were lost to domestic productivity improvements. Those seven jobs cannot be brought back from overseas because they never left the US.

Write an evaluation of credible economists’ unbiased opinions on the benefits, costs, and results of current US trade and tariff policies. Complete the following in your evaluation:

• Evaluate how US trade policy changes in the last 2 years affect global trade activities by multinational corporations.
• Discuss credible economists’ opinions on the long-term effects of trade and tariff policies changes in the last 2 years.
• Explain the effect of recent changes to trade and tariff policies have had on your employer, you, or someone you know.

Answer 1

To give a real picture of how the nation is doing, the current account is often measured as a percentage of GDP; as a country grows, a larger surplus or deficit in the current account is not a source of concern because the economy can more readily absorb the impact.

The main concern of every economists strikes out at trade policies Making it a base to negotiate a free trade with less or no trade barriers. Though trade agreements provide a norm for liberal platform between the traders, the actual provisions are heavily made by domestic and international political realities.

We estimate that the Trump administration’s imposition of tariffs, along with retaliatory actions taken by our trading partners, will reduce economic output, income, and employment.

The economic theory has evolved substantially since the time of Adam Smith, and it has evolved rapidly since the GATT was founded.David Ricardo introduced an extremely important modification to the theory in his On the Principles of Political Economy and Taxation.

World has changed since the time of Smith and Ricardo. Today, trade is no longer mostly between small producers and farmers but giant global corporations that buy parts and materials from around the world and sell globally. These giant supply chains were made possible by trade liberalization and technology changes, and they account for the fact that international trade has expanded far more rapidly than global economic growth since 1970. These global supply chains also have implications for strategies for developing countries in promoting economic growth.

Clearly, the United States benefits when its trade partners reduce their trade barriers, because its exports will increase, which generates expanded production and employment. Most economists also believe that the United States benefits from reducing its own trade barriers, as consumers gain from reduced costs and producers are forced by international competition to improve efficiency. However, import liberalization has an impact on domestic labor and production that needs to be considered.

Some of the activities of past 2 years in the US economy:

August 8, 2018
U.S. threatens a 10% tariff on $200 billion of Chinese goods if China retaliates for the previous 10% tariff, and that would extend to an additional $200 billion of goods. This would amount to a $40 billion tax increase.

August 29, 2018
Tax Foundation separated our automobile tariff estimate to show auto imports from Canada, and made slight estimate adjustments to correct for rounding

July 5, 2019
U.S. again threatens additional tariffs on Chinese imports if China further retaliates, increasing threats from levies on $200 billion and another $200 billion to $200 billion and $300 billion.

August 1, 2019
U.S. announces 10% tariff on $300 billion Chinese goods, to be levied on Sept. 1, lowered from the previously announced 25% on $325 billion.

August 23, 2019
China announces additional tariffs on $75 billion of U.S. imports, from 5-10%, and will resume tariffs on U.S. cars and car parts suspended earlier in 2019. Tariffs to begin Sept. 1 and end Dec. 15.

U.S. announces 10% tariff on $300 billion of Chinese goods to increase to 15%, some beginning Sept. 1, others on Dec. 15.

October 3, 2019
U.S. announces 10% and 25% tariffs on $7.5 billion European Union goods under WTO ruling, with the authority to raise the tariffs to 100%.

February 14, 2020
U.S. reduces tariffs on $120 billion of Chinese goods by half to 7.5% and China reduces tariffs on approximately $75 billion of US goods in half to 2.5% and 5%.

Estimates show that U.S. GDP would fall another 0.04 percent ($11.05 billion) and cost an additional 34,200 full-time equivalent jobs if all retaliatory tariffs were imposed.

It is important to note, however, that unlike the tariffs that the United States could impose, which would raise some federal revenue, tariffs imposed by foreign jurisdictions would raise no revenue, but result in lower U.S. output