The Consequences of International Trade Policy in the U.S.
economy continues to draw attention in economic and political circles. It is true that, the international market has become increasingly important as a source of demand for U.S. production and a source of supply for U.S. consumption. Indeed, it is substantially more important than is implied by the usual measures that relate the size of the international sector to the overall economy. This paper explores the role international trade now plays in the U.S. economy and answers the important questions for economic policy: How does international trade affect economic well-being?
One exception to this general conclusion that is now broadly accepted by economists is the rare case when the economies of scale are so strong, such as may be the case for such products as supercomputers and wide‐bodied commercial aircraft, that the relevant market can only support one or two producers. In that narrow case, the average income in one nation may be increased by measures to assure the survival of a domestic firm, but only if the benefits to the surviving firm are larger than the costs of winning the competitive contest.
Sending out merchandise and ventures produces pay for a nation. When a nation sends out more than it imports (the contrast, among fares and imports is sure), it is an exchange excess. At the point when the inverse is valid, it is an exchange deficiency. When a nation sends out precisely as much as it imports, it is an adjusted exchange. By implication, the balance of payments uncovers whether the nation creates enough financial yield to pay for its development. Please note that the BOP deficiency implies the nation imports more merchandise, administrations, and capital than its trade. An exchange shortfall is caused by an adjustment in the nation’s reserve or investment. U.S. national reserve decline is influenced by oil import, and its foreign trade policy. By implication, the country’s operations with other nations increased its imports. The developing U.S. spending deficiency has been reprimanded for the broadening exchange shortfall in view of the purported “twin shortage” speculation (which expresses that spending deficiencies cause exchange shortages). Consequently, the nation’s dependence on foreign oil widened its trade deficit (Machlup, 2015).
The deficit has been increasing but has not negatively impacted economic growth. The threat of trade tariffs could upend relationships, creating uncertainty and impacting global value chains. In the end, the United States remains as the most important consumer markets. The purposed tariffs by the U.S. and from the U.S will have a huge effect on the economy of the United States and China but also the rest of the globe.
Frenkel, J. (2014). A theory of money, trade and the balance of payments in a model of accumulation. The Journal of International Economics, 14(7), 158–187.
Machlup, F. (2015). Three concepts of balance of payments and the so-called dollar shortage. Economic Journal, 25(9), 46 – 68.