The following scientific essay is an analysis of the consequences of tariffs and trade and assesses the U.S. impact on international trade. The term paper is divided into two main parts. The first part includes a theoretical discussion of the international trade theory and provides an introduction to the comparative advantage. It represents an explanation of the usage of tariffs and how it affects a vast country like the United States. The second part is a short assessment of the U.S. trade and tariff policy. The background and the current issue will be discussed. In the end, there will be a summary with a conclusion of this term paper.
In the year 2018 Trump and his administration imposed import tariffs. The tariffs had raged in rate between 10 and 50%. Especially China, the most important trading partner to the U.S. retaliated with tariffs on approximately $121 billion exports from the United States. This behaviour led to the “trade war” between the U.S. and China. Besides, the trading partner China, other trading partners got also imposed with higher tariffs. The behaviour from the U.S. raised some questions about the future path of international trade.
Table of Contents
1 Introduction
2 Theories behind trade and tariffs
2.1 International trade theory and the comparative advantage
2.2 Point of tariffs
2.3 Welfare effects of a tariff
3 Assessment of U.S. trade and tariff policy
3.1 Background
3.2 Current issue and assessment
4 Conclusion
Objectives and Topics
This essay aims to analyze the economic consequences of U.S. trade and tariff policies by applying fundamental international trade theories, specifically examining the "trade war" context initiated by the Trump administration.
- Theoretical foundations of international trade and comparative advantage.
- Economic mechanisms and welfare effects of imposing import tariffs.
- Historical background and current status of U.S. trade policy.
- The impact of unilateral tariff actions on global trade relations and economic growth.
Excerpt from the Book
2.1 International trade theory and the comparative advantage
International trade allows lower prices due to the more competitive pricing. The international trade theory deals with trade between countries but also the effects on these involved. There are two main theories the classical and the new trade theory. The classical theory is often connected to Adam Smith and his oeuvre - the wealth of economic nations. The main conclusion of his approach is that a state should focus on the production of those things that it can produce more cheaply than other states.
In the Theory of Smith, trade only exist if one party is having a clear cost advantage. The economist David Ricardo expanded Smiths theory; the new trade theory. He said that each country should specialize in the production and export of those goods that it can produce with the smallest absolute cost disadvantage. Foreign trade is therefore also beneficial if a country is at a disadvantage in the production of all goods. These findings led to the comparative advantage. The comparative advantage is not the same as the absolute advantage, which is advocated by Adam Smith. Smith argued only to produce goods if a country can produce more of the good with fewer or the same resources than the competitor its country.
Summary of Chapters
1 Introduction: This chapter provides an overview of the U.S. trade policy shift during the Trump administration and outlines the objective of the scientific essay.
2 Theories behind trade and tariffs: This section details the fundamental economic theories governing international trade, including comparative advantage, the mechanics of tariffs, and their resulting welfare implications.
3 Assessment of U.S. trade and tariff policy: This chapter contextualizes U.S. trade history and evaluates the recent implementation of unilateral tariffs on major trading partners like China.
4 Conclusion: The final chapter summarizes the findings, noting that while tariffs aim to protect domestic interests, they often result in broader welfare losses and economic complexities.
Keywords
International trade, tariffs, comparative advantage, U.S. trade policy, protectionism, trade war, welfare effects, import duties, Adam Smith, David Ricardo, economic growth, global economy, consumer surplus, producer surplus, market liberalization.
Frequently Asked Questions
What is the core focus of this paper?
The paper examines the economic consequences of U.S. trade policies and tariff impositions, analyzing them through the lens of classical and modern trade theories.
What are the primary themes discussed?
The central themes include the comparative advantage theory, the mechanics of tariffs, the history of U.S. trade, and the recent economic confrontations with trading partners like China.
What is the primary research goal?
The objective is to assess the impact of recent U.S. tariff policy on international trade and the domestic economy within the framework of established economic theory.
Which scientific method is utilized?
The essay employs a qualitative analysis of international trade theory, using graphical economic models to demonstrate welfare effects and evaluating current policy decisions.
What is covered in the main section?
The main section covers the theoretical basis of trade, the definitions and impacts of tariffs, a background on U.S. market orientation, and an assessment of current protectionist trends.
Which keywords define this work?
Key terms include international trade, tariffs, comparative advantage, protectionism, trade war, welfare effects, and U.S. trade policy.
How does the author explain the difference between absolute and comparative advantage?
The author distinguishes them by noting that absolute advantage involves producing more with fewer resources, whereas comparative advantage suggests countries should specialize in what they can produce with the smallest relative cost disadvantage.
What is the consequence of tariffs according to the welfare model presented?
According to the model, tariffs generally lead to an increase in domestic producer surplus but cause a loss for consumers and a net loss for the national welfare due to trade restrictions.
Why did the U.S. government implement tariffs on Chinese imports?
The paper identifies these as unilateral actions by the Trump administration aimed at pressuring Chinese policy and addressing the trade deficit, often labeled under "America first" politics.
- Quote paper
- Anonym (Author), 2020, An assessment of the current U.S. trade and tariff policy in the light of the economic theory, Munich, GRIN Verlag, https://www.grin.com/document/1026120
