Question

In: Economics

President Trump and his administration clearly signal a shift in US global economic policies that suggest...

President Trump and his administration clearly signal a shift in US global economic policies that suggest a more protectionist approach.

Do you agree or disagree with such an approach? In other words, is the increased protectionism in US global economic policy (both in rhetoric and action) useful and beneficial? What can be the advantages and disadvantages of such a shift?

Solutions

Expert Solution

No we do not agree with this policy. It appeals more to emotions than to logic. By this policy we can increase production of some goods and can produce them domestically. This will also increase employment. But at the same time customers surplus will decrease greater than gain to producers and increase in government revenue due to tariffs. This is the conclusion of international trade theory. Also even though we can increase some jobs a large no. Of jobs will be lost in export sector due to retaliation of other countries. International trade theory which is irrefutable and has stood the test of time has shown that each can gain by focusing on its comparative advantage. This will increase world output and welfare. It is true that some scare factors like labour in USA will loose but by appropriate redistribution policies they can be compensated by the winners and there will be still enough surplus left.


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