International Trade Evaluation

International Trade Evaluation

How U.S. Trade Policy Changes in the Last 2 Years Affect Global Trade Activities by Multinational Corporations

According to Hossain (2020), Trade policies play a significant role in regulating a country’s trade activities with other countries. Various countries, such as the United States, have introduced trade policies to secure their interests in global trade. The trade policies are regularly changed based on the changes and disruptions in the international trade sector, such as the trade war between the United States and China. The U.S. trade policy changes in the last two years focused on creating more opportunities for local companies, thus limiting global trade activities by multinational corporations. According to Meltzer (2022), the policy focused on creating a risk-based approach to international trade, renewing the role of industrial policy, and increasing cooperation for trusted partners and allies. The risk-based approach to global trade included increased reliance on investment restrictions and export controls to strictly regulate access to products that the United States believed could not threaten its economic and national security. For example, the U.S. introduced export controls that blocked China’s access to the semiconductors used in artificial intelligence and China’s ability to manufacture or design advanced chips.

The renewed role of industrial policy focused on strengthening the United States’ capacity for supply chain resilience, competitiveness, and national security. According to Meltzer (2022), the U.S. focused on increasing cooperation with trusted partners and allies by reducing support for traditional agreements and multilateralism in favor of more economic engagement with trusted partners and allies. The policy changes also increased tariffs for multinational corporations, thus reducing their global activities because they were forced to respond to the high tariffs by withdrawing or reducing their business activities in the United States. Schoenbaum (2023) argues that the U.S. trade policy changes increased levy tariffs on imported products, including primary products imported from other countries such as China. Therefore, the most immediate response considered by most manufacturing companies was to stop exporting their products to the United States. The trade policy changes also disrupted global supply chains, making it hard for multinational corporations to sustain their supply chains and continue doing business in some countries.

The U.S. trade policy changes also increased prices and disrupted supply chains because the countries affected by the changes increased tariffs on exports from the United States (Xing, 2021). The main impact of disrupting supply chains was reduced demand for imports from third-world countries such as China (Cigna et al., 2020). Reduced demand for imports impacted the profitability of the multinational companies, leading to limited involvement in global trade activities involving the United States and its allies. The U.S. trade policy changes also created opportunities for international companies in bystander countries to invest in new trade infrastructure and new facilities to survive the downward sloping of the supply curve (Fajgelbaum et al., 2023). The corporations can continue using the new opportunities to expand their operations worldwide to increase global trade activities.

Economists’ Opinions on the Long-Term Effects of Trade and Tariff Policies Changes in the Last 2 Years

Various economists have provided their opinions on the long-term effects of trade and the changes in tariff policies in the last two years. For example, Marshall W. Meyer, a business management professor at Wharton School, stated that the trade and tariff changes made in the last two years could lower the output of the U.S. economy and shift the financing of the U.S. debt to households. Meyer (2019) also argues that the tariff changes could reduce foreign capital inflows in the United States and reduce Gross Domestic Product in the long run. Mary E.Lovely, a professor of economics at the Maxwell School of Citizenship and Public Affairs at Syracuse University, stated that the tariff changes will create lower-priced inputs for the rest of the world, and the companies in the United States will be forced to compete with other global companies (Meyer, 2019). Meyer (2019) also argues that the tariff changes will reduce the efficiency of the entire economic system in the United States and increase the U.S. debt because of reduced trade with China, the leading trade channel used by the U.S. to finance its debt. Another economist, Efraim Berkovich, a Ph.D. economist and former head of macroeconomics at the University of Pennsylvania, stated that the trade tariff changes would reduce foreign capital inflows because of the reduced purchases of U.S. debt by foreign companies (Meyer, 2019). The tariff changes would also limit the development of e-mobility because they would hurt the entire European Union supply chain, including companies that manufacture batteries (Doherty, 2023). The impact of the tariff changes on manufacturing could significantly impact the Gross Domestic Product of countries that rely on the manufacturing sector for economic growth, thus disrupting the global economy.

Impacts of the Recent Changes to Trade and Tariff Policies on My Employer

The changes to trade and tariff policies have impacted many companies in the United States, including my employer. One of the impacts the changes have had on my employer is reduced production because we have to rely on locally sourced raw materials. Before the trade and tariff policy changes, my employer imported raw materials from China because the imported raw materials met the company’s quality requirements. However, the trade tariff policy changes increased the cost of the imported raw materials, forcing the company to look for a local supplier. The main impact of sourcing locally has been a reduction in the quality of our products because the locally sourced raw materials are of standard quality. We also experience delays in production because we compete for raw materials with other companies within the country. The trade tariff policy changes have also forced our employer to reduce most employees’ salaries to maintain profitability. The leading cause of the reduced salaries is the reduced process of our products due to reduced quality of our products. Due to the tariff policy changes, my employer has also been forced to postpone expanding into China. The decision to postpone expanding into China was influenced by the increased cost of undertaking business in China, which could reduce our company’s profit margins and revenue.

 References

Cigna, S., Meinen, P., & Schulte, P. (2020). (Working paper). The impact of U.S. tariffs against China on U.S. imports:  evidence for trade diversion? (Ser. 2503). European Central Bank.

Doherty, S. (2023). International trade: What you need to know this month. World Economic Forum. https://www.weforum.org/agenda/2023/05/international-trade-what-you-need-to-know-may-2023/

Fajgelbaum, P., Goldberg, P., Kennedy, P., Khandelwal, A., & Taglioni, D. (2023, June 10). The “bystander effect” of the US-China trade war. CEPR. https://cepr.org/voxeu/columns/bystander-effect-us-china-trade-war

Hossain, M. (2020). Trade liberalization policies and trade performances in Bangladesh: An empirical evaluation. Bangladesh’s Macroeconomic Policy, 241–265. https://doi.org/10.1007/978-981-15-1244-5_9

Meltzer, J. (2022, November 4). Rewiring U.S. trade policy to address new global realities. The Hill. https://thehill.com/opinion/international/3719612-rewiring-us-trade-policy-to-address-new-global-realities/

Meyer, M. (2019). What are the long-term costs of the China-U.S. trade war? Knowledge at Wharton. https://knowledge.wharton.upenn.edu/podcast/knowledge-at-wharton-podcast/u-s-china-tariffs/

Schoenbaum, T. J. (2023). The Biden Administration’s Trade policy: Promise and reality. German Law Journal, 24(1), 102–124. https://doi.org/10.1017/glj.2023.7

Xing, Y. (2021). Global value chains and the U.S.–China trade war. Geopolitics, Supply Chains, and International Relations in East Asia, 23–40. https://doi.org/10.1017/9781108985468.004

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International Trade Evaluation

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 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 their overseas subsidiaries.
Foreign-owned companies operating in the US number in the thousands and provide direct or indirect jobs 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 it was 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. This has been offset by reduced imports of goods 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 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 recent changes to trade and tariff policies have had on your employer, you, or someone you know.