International Trade

International Trade

The past several years have witnessed a profound shift of international trade away from the level playing level. The US government has usually responded by adjusting its trade and tariff policy. However, these measures affect the local economy in various ways. While protective tariffs reduce the aggregate demand for imported goods, they lead to adverse economic outcomes in the long run. Recent trade policy changes have seen President Trump adopt a more aggressive international trade approach by imposing high tariffs on certain commodities from China, Canada, and Mexico. As a result, these countries have also set trade barriers, such as tariffs on US products or intellectual property protections. For the most part, businesses and consumers have been forced to bear the cost. Therefore, summarizing an evaluation of the benefits and costs of changes in the US trade and tariff policy in the last five years, two years, and most recently, will be necessary.

Effects of US Trade Policy Changes in the Last Five Years on the Global Trade Activities by Multinational Corporations

The US Trade Policy has been characterized by stricter trade barriers using tariffs in the last five years. Notably, the government has imposed tariffs of 11% on imported goods since January 2018 (Fried, 2019). Some of the taxes have been applied to imports from most of the country’s trade partners, with some of the most affected products being solar panels, washing machines, and aluminum products (Fried, 2019). Other trade barriers featured in the US trade policy changes include rules about minimum wages for multinational firms (Fried, 2019). These changes have mostly affected multinational corporations’ cost of offshoring and on-shoring. Meanwhile, global enterprises face variable cost challenges depending on how much is produced or exported, sunk costs of starting production, and fixed per-period production costs. These aspects are central to the effects of the US Trade policy changes in the past five years.

The effects of the US trade policy changes are dynamic on trade activities by multinational corporations. Foremost, export activities between multinationals located in the US and those in other foreign countries become costlier (Garetto et al., 2019). In this way, sales from the US-based affiliates to other governments and foreign-based multinationals to the US decline, reducing the incentives to open affiliates in the US and other foreign countries due to the high exportation costs between various countries and the United States. Another notable effect of these changes is that they heighten trade costs, affecting multinationals’ decisions to enter and exit export markets (Garetto et al., 2019). In addition, the trade policy change increases trade costs, which, in turn, raises the prices of multinational corporations’ goods and services in the US and foreign countries (Garetto et al., 2019). As a result, the high process price of goods and services encourages more corporations to export from the US to foreign markets.

Are you in urgent need of assignment help ? Get in touch with us.

Opinions on the Long-Term Effects of Trade and Tariff Policies

Trade and tariff policy changes have affected the US economy in the last two years. Generally, tariffs and other international trade barriers result in consumers paying more for goods and services to support domestic firms. One unique short-term effect of increased trade barriers and tariffs is that they protect domestic firms from competition, especially those producing goods subject to these barriers (York, 2018). This situation raises the aggregate demand for local commodities. As time elapses, consumers have developed less purchasing power on other goods, implying that one industry is propped up at the expense of the rest. This scenario triggers inefficient allocation of resources, leading to slow economic growth.

Trade barriers reduce economic output and incomes in the long run. Essentially, stricter trade barriers erect obstacles to trade by raising prices while diverting resources from relatively efficient towards less efficient economic activities (York, 2018). Trade policy measures that create trade barriers make consumers pay more for goods and services. In addition to this, businesses face higher costs, decreasing output and employment rates. One of the channels through which tariffs can have this effect is passing the high taxes on imports on to producers and consumers at increased prices (Piotrowski, 2016). For instance, these trade barriers can increase the cost of intermediate goods, increasing the price of goods that depend on them. The high cost of intermediate goods also reduces the private sector’s output. The effect would be reduced income for firms and employees.

In the same way, higher consumer prices decline the after-tax value of capital and labor (York, 2018). Ultimately, US citizens would work and invest less since high prices would reduce the delivery return and the output. Thus, trade and tariff policy changes in the last two years can harm the economy in the long run.

Effects of Recent Changes to Trade and Tariff Policies

Recent changes to trade and tariff policies increase the prices of imports and can affect people in different ways. The recent changes are based on trade protectionism, which advocates for stricter tariffs on Canada, China, Mexico, and the European Union (EU) (Piotrowski, 2016). The changes were premised on the idea that they would benefit American workers and give the United States leverage to renegotiate trade agreements. Nevertheless, these tariffs continue to hurt consumers who must bear the high prices of imported goods. To illustrate, my grandfather is a local soybean producer and always exports soybeans to countries such as China and Canada, which also impose tariffs. The long-term effects of these trade barriers have reduced the demand for soybeans. As a result, my grandfather’s soybean business has been performing dismally lately due to the recent tariff changes.

Recently, the US has significantly changed its trade and tariff policies to promote economic and political goals. One manifestation of this policy shift is the increased use of trade and tariffs that erect barriers to international trade, ultimately hurting domestic consumers and exporters in the long term. Imposing these barriers on imports attracts similar restrictions in foreign markets. Lastly, it is evident that the country’s citizens assessing tariffs pay for these tariffs, not those of the country producer of the products upon which the taxes are levied.

References

Fried, D. (2019). Latest | Congressional Budget Office. Cbo.gov. Retrieved 18 March 2022, from https://www.cbo.gov/taxonomy/term/39/latest.

Garetto, S., Oldenski, L., & Ramondo, N. (2019). The effect of trade policy shocks on multinational enterprise activities | VOX, CEPR Policy Portal. Voxeu.org. They were retrieved from https://voxeu.org/article/effect-trade-policy-shocks-multinational-enterprise-activities.

Piotrowski, S. (2016). The “Open Government Reform” movement. The American Review of Public Administration, 47(2), 155-171. https://doi.org/10.1177/0275074016676575

York, E. (2018). The Impact of Trade and Tariffs on the United States. Tax Foundation. Retrieved from https://taxfoundation.org/impact-of-tariffs-free-trade/#:~:text=Trade%20barriers%2C%20such%20as%20tariffs,employment%2C%20and%20lower%20economic%20output.

ORDER A PLAGIARISM-FREE PAPER HERE

We’ll write everything from scratch

International Trade

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

Consider the following:

Tariffs are paid by the citizens of the country imposing tariffs, not by the country’s citizens producing the products upon which the taxes 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 rise 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 are traded between US multinational companies and overseas subsidiaries.
Foreign-owned companies in the US number in the thousands and provide jobs directly or indirectly for more than 13 million US workers (roughly 10% of the US workforce).
The US trade deficit in goods in 2018 (as a % of GDP) was the same as 5, 10, and 15 years earlier.
The rise in the US goods trade deficit with China has not increased the US total goods trade deficit. Reduced goods imports from other trading partners have offset it.
There is a strong correlation between the rise in world trade and:
The increase in world GDP
The dramatic fall in the world’s extreme poverty rate
The surge 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 returned from overseas because they never left the US.

Write a 700- to 1,050-word evaluation of credible economists’ unbiased opinions on current US trade and tariff policies benefits, costs, and results. Complete the following in your assessment.

Evaluate how US trade policy changes in the last five 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 two years.
Explain the effect that recent changes to trade and tariff policies have had on your employer, you, or someone you know.

Cite at least two academically credible sources.