The Personal Impact of International Trade
Items Around the Home: Domestic vs. Foreign Production
International trade significantly affects me due to the lowered prices on many goods imported into the United States. After checking ten labels on tech devices, clothes, and appliances, I discovered that four items around my house, which I had purchased in the previous year, were made in China. However, the United States’ products took second place with three articles, followed by South Korea, Vietnam, and Italy in third place.
Major U.S. Exports and Imports in the Global Market
United States companies primarily export electronic devices, vehicles, meat, and agricultural goods (Coppock & Mateer, 2021). This notion suggests that industries that maintain their manufacturing within the country’s borders either rely on the availability of a highly educated workforce or on the local climate that enables them to produce perishable goods.
The United States imports many items, which is fiscally more beneficial for its citizens. Even local companies transfer their manufacturing facilities abroad to optimize the costs of their business operations, which is visible in the country’s negative trade balance (Coppock, n.d.). This notion is reflected in the number of deals companies have with U.S. importers. Imported goods include cars, electronic devices, medical equipment, clothing, toys, and millions of tons of food, as 238 nations compete in the U.S. market (Coppock & Mateer, 2021).
The Role of Comparative Advantage in Shaping Trade Patterns
What I have learned about comparative advantage reveals that this is a natural outcome in a free market. Firms that incur the lowest opportunity cost on a good they produce make it challenging for companies with manufacturing within U.S. borders to maintain their comparative advantage (Nabors, n.d.). Considering this notion when making decisions regarding cost optimization strategies is essential.
Understanding Tariffs and Their Broader Effects
Defining Tariffs and Their Economic Purpose
Tariffs in the United States are a heated topic for debate, as these additional costs on imported goods make the country’s markets less appealing to foreign manufacturers. Importers ultimately pay tariffs, which become revenue for the government that imposes them (Coppock & Mateer, 2021). However, consumers also suffer from these additional costs, as the prices of such products increase and the availability of cheaper options decreases. Trade deficits occur when the current account balance of payments is impacted by government budget issues, low personal savings, and the nation’s ability to import goods with ease (Coppock & Mateer, 2021). Tariffs partially mitigate this deficit by reducing the incentive for firms to import as many resources as possible from outside providers, and the revenue from these fees may support the development of local industries.
Advantages and Disadvantages for Workers and Consumers Worldwide
The advantages of this market manipulation method are questionable, while its downsides are apparent. American workers benefit from tariffs, as their companies can supply more goods to meet a portion of the demand previously covered by foreign firms (Coppock & Mateer, 2021). However, due to artificial price hikes, local consumers now have to pay higher prices.
Moreover, retaliatory actions from countries targeted by tariffs cause foreign customers to suffer the same fate, as products made in the United States become more expensive. As foreign companies lose access to the market, they are likely to decrease their production volumes, which may result in layoffs of a significant portion of their workforce (Coppock & Mateer, 2021). In conclusion, most stakeholders involved do not experience any positive outcomes from government market control.
References
Coppock, L. (n.d.). Causes of trade deficits [Video]. Norton Digital Resources. Web.
Coppock, L., & Mateer, D. (2021). Principles of macroeconomics (3rd ed.). W.W. Norton & Company.
Nabors, Y. (n.d.). Comparative advantage [Video]. Norton Digital Resources. Web.