Introduction
In the international trade, countries are obliged to consider the state of industries of their trade partners. Nations whose economies size up to each other have to carefully assess their comparative advantage in order to ensure that they benefit from international deals. Through the example of Japan-US trade relationship, it is possible to understand how a comparative advantage shapes the countries’ markets. This paper will analyze the importance of a proper assessment of a nation’s and its partner’s economy.
The International Trade Between the United States and Japan
International trade presents a complex environment that may be challenging to navigate, especially if there are significant restructures underway. In an attempt to encourage citizens to purchase locally manufactured automobile parts, President Trump was set on decreasing the country’s imports through tariffs and quotas (Hufbauer and Jung). However, his assessment lacked a proper evaluation of comparative advantage. The data shows that the U.S. import of automobile parts to Japan is 22.6 times lower than Japan’s import to its partner (Hufbauer and Jung). Moreover, the United States did not have an overall comparative advantage, as Japan’s imports were significantly higher than its exports of U.S. goods (Hufbauer and Jung). Thus, Trump’s threats of increased tariffs were insubstantial and baseless.
Conclusion
In conclusion, Trump’s decision to limit the import of Japan’s auto parts could have led to the destabilization of the auto market due to the U.S. being unable to match its partner’s manufacturing capacity. This analysis shows that the U.S. was not in the position to impose severe restrictions on Japanese firms, as their contribution to the local economy overshadowed the country’s export to its partner. There is a multitude of issues that would come back at both U.S. consumers and manufacturers if such quotas were imposed.
Work Cited
Hufbauer, Gary C., and Euijin Jung. “Will Auto Trade Be a Casualty of US-Japan Trade Talks?” The Peterson Institute for International Economics, Web.