Evaluating the Impact of Current U.S. Trade and Tariff Policies- A Review of Economists Perspectives

Evaluating the Impact of Current U.S. Trade and Tariff Policies- A Review of Economists Perspectives

International trade delivers multiple benefits for the American traders and economy and the other nations that take part in these transactions. In the past two years, international trade policies have shifted significantly in the USA (Evenett & Fritz, 2020). Most significantly, the US-China trade interactions have experienced a multitude of challenges due to the newly imposed tariffs that run into billions of dollars. The former president, Donald Trump, imposed numerous trade tariffs on Chinese-originating imports. These tariffs were intended to eliminate or reduce unjust trade practices, minimize the country’s trade deficits, and increase the local manufacturing processes in the USA for better security and competitiveness. These tariffs have remained in place even after the entry of President Joe Biden (Chatzky & Siripurapu, 2021).

These tariffs created significant tension and uncertainty that resulted in decreased global trade volume by at least 9.2 per cent in 2020. The previous administration’s restrictions on China and other nations affected the prices and trade flows of specific sectors. Other analysts suggested harm to business outlooks as well as the investment plans. These analysts argued that investors and business people may have been worried about disruptions to the supply chains as well as the risk of further restrictions (Cimino-Isaacs, 2021).

The tariffs are intended to protect domestic producers by increasing the cost of imported goods. They tend to have different effects on the local manufacturers. For instance, tariffs that were imposed in 2018 did not increase the volume of local manufacturers’ production as intended. The tariffs did not also boost employment in the sector. Instead, they increased the prices that producers had to pay further due to the high cost of inputs. This clearly demonstrates the lack of the desired positive impact of tariffs on trade, especially ones that are issued continuously in retaliation. The trade wars that involved China, the USA, and other nations such as Canada, Mexico, and the European Union affected the ability of nations to participate in global trade beneficially (Flaaen & Pierce, 2019).

In the long term, trade tariffs are expected to impact trade negatively. Besides failing to reduce the country’s trade deficits, which also exist between the USA and at least more than one hundred nations, the tariffs will make it difficult to trade with China. The less amicable trade relations that the tariffs have established will make trade interactions between China and the USA sour for a long time. The policy uncertainty that such tariffs create is also expected to increase the potential investors’ insecurity and investment. The reduction of capital expenditure (CAPEX) spending is expected to reduce globally (York, 2018). Investors may hold back additional investments due to the uncertainty. Furthermore, consumers are likely to pay more for products because the producers will transfer the additional input costs (NCUSCR, 2021). As a result, the country’s economic growth is expected to reduce since increased employment in the manufacturing sector is not forthcoming, investments and capital expenditures are reduced, and products become more expensive.

The tariffs have a negative effect on business owners. For instance, Nicole Panettieri owns the Brass Owl, a retail shop that sells shoes and other accessories. Nicole is unable to create more jobs through employment. In addition, there is a possibility of losing clients because they will seek alternative and cheaper merchandise sellers. The case is similar for Tiffany Williams, who owns the Luggage Shop in Lubbock. Tiffany explains that most of her merchandise is sourced from China. A small portion is sourced from local producers. The increase in tariffs affects the client’s spending ability. It reduces their disposable income significantly. The disruption of current supply chains, which have served the businesses for years, is expected to destabilize business. Furthermore, an increment in the process by at least 25 per cent due to tariffs is expected to increase the proof that consumers pay for the products. This means that both shop owners and clients must pay more for their goods (NRF, 2021). Both Nicole and Tiffany will be forced to stock their products for longer because they will not be able to sell high volumes as they have done in the past.

Ron Romero reiterates a similar narrative, Schaefer’s TV and Appliance owner based in Lincoln, Nebraska. According to Ron Romero, these tariffs directly increase the cost of products, especially for consumers. For business owners, the likelihood of layoffs increases because businesses will be unable to support more employees. This loss of employment will affect the economy negatively by reducing the income that a nation receives in the form of taxes from employees and businesses. Ron Romero emphasizes that some of the control elements for electronic appliances are imported (NRF, 2021). Therefore, the presence of tariffs will increase the costs of these elements significantly, leading to higher purchase prices. The three business owners agree that the tariffs are unnecessary for consumers because they increase the price of goods, reduce sales volume, disrupt current supply chains, and negatively affect disposable income.

References

Chatzky, A., & Siripurapu, A. (2021, October). The Truth About Tariffs. Council Foreign Relations. Retrieved from https://www.cfr.org/backgrounder/truth-about-tariffs

Cimino-Isaacs, C. D. (2021). US Trade Policy Primer: Frequently Asked Questions.

Evenett, S. J., & Fritz, J. (2020, January). How has global trade policy shifted over the past 3 years? Brookings. Retrieved from https://www.brookings.edu/blog/future-development/2020/01/23/how-has-global-trade-policy-shifted-over-the-past-3-years/

Flaaen, A., & Pierce, J. (2019). Disentangling the Effects of the 2018-2019 Tariffs on a Globally Connected US Manufacturing Sector. doi:https://doi.org/10.17016/FEDS.2019.086

NCUSCR. (2021). Five Economists Explain: Impacts of the U.S.-China Trade War. Retrieved from National Committee on United States-China Relations: https://www.ncuscr.org/media/podcast/uschinainsights/economists-explain-trade-war

NRF. (2021). The Impact of Tariffs on Small Business. Retrieved from National Retail Federation: https://nrf.com/hill/policy-issues/impact-tariffs-small-business

York, E. (2018). The Impact of Trade and Tariffs on the United States. Retrieved from Tax Foundation: https://taxfoundation.org/impact-of-tariffs-free-trade/

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Write a 700- to 1,050-word 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 policy 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.