- Some politicians, labor unions, and special interest groups argue that US trade deficits are harmful to the economy and nations that run large trade surpluses with the US are benefiting from unfair trade practices and agreements. These parties support increasing tariffs on imports, elimination, or re-writing of trade agreements.Respond to the following in a minimum of 175 words:
- Discuss what credible economists say about the effects that tariffs, changing trade agreements, and/or manipulating exchange rates will have on the total US trade balance.
- Do you agree with their assertions? Why or why not?
Reply to these two classmate’s statements below whether you agree or disagree. State why and explain. or your faculty member. Be constructive and professional. You will respond in 100 words each statement.
1)Hi class,
The effects of tariffs, changing trade agreements, and manipulating exchange rates on the total US trade balance are subjects of great debate among economists. Many economists believe that tariffs have a negative impact on the US trade balance.
Tariffs increase the cost of imported goods, leading to higher prices for consumers and businesses that rely on these imports. This can reduce overall economic output and employment. For example, Nicholas Lardy from the Peterson Institute for International Economics believes that tariffs have hurt US manufacturing by increasing input costs and reducing competitiveness. Additionally, retaliatory tariffs from other countries can further harm US exports, making trade imbalances worse.
On the other hand, economists generally agree that free trade agreements (FTAs) have a positive impact on the US trade balance by reducing trade barriers and promoting economic growth. Research from the US International Trade Commission suggests that FTAs have increased US trade surpluses or reduced trade deficits with partner countries. For instance, the US-Mexico-Canada Agreement (USMCA) is credited with improving trade flows and economic integration among the three countries. However, sudden changes or uncertainties in trade agreements can disrupt trade and investment, leading to short-term negative impacts on the trade balance.
Currency manipulation, where countries artificially lower their currency value to boost exports, is a controversial issue. Economists believe that this practice can lead to job losses in the US by making US exports more expensive and imports cheaper. However, the overall economic effects are complex. While US exports may decline, consumers benefit from cheaper imports. The net effect on the trade balance depends on various factors, including the extent of currency manipulation and the responsiveness of trade flows to exchange rate changes.
Overall, the consensus among economists is that trade policies should aim to promote free trade and reduce barriers to maximize economic benefits. Tariffs and protectionist measures tend to harm the economy by raising prices and reducing trade volumes. Conversely, free trade agreements generally improve trade and economic growth. Currency manipulation presents a challenging issue, with mixed effects on the trade balance and broader economy.
In summary, I believe that while tariffs and protectionist measures are seen as harmful to the US trade balance, free trade agreements and stable exchange rates are viewed as beneficial. It’s important to strike a balance that promotes economic growth while addressing the challenges posed by global trade dynamics.
2)in its investigation the US dept of Commerce found that the Chinese government had engaged in a range of unfair policies and practices toward the US intellectual property like patents, copyrights and trade secrets.
On July 7th the US government imposed 25% tariffs on $34 billion of Chinese exports of 818 products to the united States. Then the Chinese government pushed back with a 25% of tariffs on $34 billion of US exports of 545 products to China.
On August 23rd, The US government reached $50 billion by imposing 25% tariffs on an additional $16 billion of Chinese Exports. The Chinese Government retaliated with a 25% tariffs on additional $16 billion of US exports.
So as you can see those countries we do trade with a sovereign countries are able to set up their on tax increase on United States Imports thereby decreasing profits from trade and hindering reasonable good trade all the way. The united States would have to look for other trade partners.
Economic analysis concludes that the country’s trade balance is driven by its macroeconomic situation, especially the difference between the country’s national saving and its domestic investment.