Question

What are the most important challenges posed by free trade for the U.S. economy?

Answer 1

While free trade is a better opprtunity for the local producers of U.S as they can export goods without any trade tariffs and taxes to the foreign market which raise their production output and profits, there are also many challanges posed by free trade for the U.S economy which are as follows:-

1) Destruction of domestic market:- Free trade gives access to the importation of foreign goods without any trade tariffs which makes the imported goods cheaper. Countries who are blessed with abundant natiral resources and cheap labours can sell off their products at much cheaper rate in the market of U.S which will create lesser demand for the locally produced items causing losses and instability in the domestic market.

2) Increase rate of unemployment:- Cheaper rate of foreign imported items in the U.S market would lead to the closure of many American production companies leading to jobless condition of workers engaged in these companies.

3) Fall of the economy:- Entry of cheaper foreign goods in U.S maeket would cause destruction to many local companies and increase the rate of unemployment leading to the collapse of the economic system due to the downfall in revenue and fewer public welfare activities.

4) Tax evasion by big companies:- Free trade would make U.S to loss great amount of tax from the large companies as these companies associated with the trade would move their plants to countries which have flexible rule for business and trades with abundant natural resources and cheaper labour. These U.S companies would run their business overseas from their own country gaining large profit rendering the govt of U.S to face financial crisis.