U.S. Trade and Tariff Policies
The U.S. is the world’s economic leader. Its economic and trade policies are drivers of global economic growth. Many international companies have their supply chains tied to the U.S. economy; thus, the decisions made by the country affect their operations. The impact of the U.S. trade decisions on the global economy has particularly been evident in the past two years. The past two years have seen significant changes in the United States international trade policy, in what has been termed as the U.S. China Trade War. The purpose of this paper is to examine the impact of these policy changes on multinational companies and the potential long-term effects that they may have on individuals and businesses.
How U.S. Trade Policy Changes in the Last Two Years Affect Global Trade Activities by Multinational Corporations
The recent trade policies by the U.S. have affected the global supply chain for a lot of multinational companies. One of the main influences has been on the costs of accessing raw materials and other products from international markets. In 2018, the U.S. started making significant policy changes, especially targeting trade with China, in what President Trump termed as an effort to make the trade between China and America fair (Ching & Li. 2018). One of the changes that he made was introducing more tariffs on selected Chinese products to discourage importing and develop local industries. For example, new tariffs were introduced on solar products and selected electronics. With such changes, businesses that depend on the importation of these products experience a significant increase in costs.
Additionally, the trade policy changes that were made by the Trump government prompted policies from China, in retaliation to the U.S. that further affected trade between the countries and with other international businesses. This trade war, lasting approximately three years, caused the United States to develop more restrictive policies. These policy changes further affected global businesses. Many U.S. multinationals depend on the Chinese market for some of their raw materials (Ching & Li. 2018). From China, they get to access products at significantly reduced prices. The new tariffs made importation from China expensive, hurting the financial performance of such businesses. Analyses of the trade policies in the past two years show that they had no significant impact on the development of local manufacturing as intended by the Trump government.
The Long-Term Effects of Trade and Tariff Policies in the Last Two Years
According to economists, the policy changes that have been made on U.S. trade with China are not without lasting consequences. Efraim Berkovich, the director of Penn Wharton Budget Model (PWBM), argued that an ongoing trade war between the United States and China could negatively affect the country’s GDP (Arvanitis, 2019). He argued that the constant increases in the trade tariffs could cause a significant reduction in foreign capital inflows to the United States. He also believes that the policy changes will negatively rather than positively affect U.S. companies, as President Trump expected. U.S. companies may experience a reduction in their global competitiveness with the tariff war. As other global companies continue to enjoy low tariffs from China, U.S. companies are restricted from that market by the high tariffs that are implemented by the U.S. government (Arvanitis, 2019). Therefore, global companies around the world will have a chance to integrate innovative technologies from China while costs restrict U.S. companies.
Mary E. Lovely, a professor of economics at Syracuse University Maxwell School of Citizenship and Public Affairs, shares the same opinion. She compared the new U.S. trade policies with tying hands in the back. She believes that several industries will take a big hit from the increased costs of getting products from China (Arvanitis, 2019). Additionally, there is a risk that the U.S. debt will grow as companies try to increase capital to afford the more expensive imports. Based on these economists’ opinions, the recent policies are bad for the U.S. economy.
The Effect of Recent Changes to Trade and Tariff Policies on Individuals and Employers
The recent policy changes have caused a domino effect trickling down to employers and employees. Therefore, some individuals have felt the impact of the policies at the household level. Some researchers predicted that the retaliatory tariffs between the United States and China would cause an increase in unemployment by between 0.2% and 0.7% (Arbor, 2019). With such changes, there are certainly people struggling at the grassroots. I know someone who has been affected by this policy. He has been running a small reselling business selling phones from China. The trade policies, specifically the expensive tariffs, made it harder to import cost-efficiently. Therefore, he was forced to increase the costs of the mobile phones. This caused a reduction in his sales. The issue is still affecting the performance of his business. He is rethinking his business strategy and may stop importing from China. His business is an example of the impact of the trade war on small businesses that depend on the Chinese market.
References
Arbor, A. (2019). The U.S. China trade war could raise unemployment rates. https://news.umich.edu/us-china-trade-war-could-raise-unemployment-rates/
Arvanitis, R. (2019). What are the long term costs of the China U.S. trade war? https://knowledge.wharton.upenn.edu/article/u-s-china-tariffs/
Chong, T. T. L., & Li, X. (2019). Understanding the China–US trade war: causes, economic impact, and the worst-case scenario. Economic and Political Studies, 7(2), 185-202.
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Question 
U.S. Trade and Tariff Policies
Promoting international trade is not a zero-sum game. It is a win-win proposition; both parties gain from trade.
Consider the following:
- 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.
U.S. Trade and Tariff Policies
- 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 rises 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 is trade between US multinational companies and their overseas subsidiaries.
- Foreign-owned companies operating in the US number in the thousands and provide directly or indirectly jobs for more than 13 million US workers (roughly, 10% of the US workforce).
- 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 US goods trade deficit with China has not increased the US total goods trade deficit. It has been offset by reduced goods imports 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 policies 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.
Cite at least 2 academically credible sources