outline assignment
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proposel.docxTrade war will not benefit US economic
Globalization fosters the international trade between different countries. Large firm in the United States are outsourcing their product to China because costs of producing goods in China is lower than other countries. This cause the trade deficits between United States and China. According to the latest data, the US trade deficit is $323 billion high (Ikenson). Because of outsourcing, less goods are produced in the domestic America, thus increase the unemployment rate (Amadeo). Free international trade has the potential to lower the cost of products, but each country has an incentive to raise the tariff. In order to create more jobs and protect the US domestic manufacturing, President trump placed tariffs on billions of dollars’ worth of Chinese imported goods. It will, in the short run, increase the price of the imported good and provide a competitive advantage to the domestic produced goods. As a result, the demand for the US made product will rise, and the local business grow and thus create more jobs. This sounds very tempting. However, in the long run it will slow down the economic growth for all countries involved. Because tariff has two counteracting effects. First it will make the imports more expensive, and second, the nominal exchange rate adjusts in such a way that a given value of imports can be financed with a lower value of exports (Mileva). Besides, it would trigger inflation when tariffs increase the prices of imports (Amadeo). In this paper, I will argue that why trade war will not benefit US economic by using the evidence, economic model and historical data. During a trade war, both countries involved will rise the tariffs on the imported goods, especially in the US, many imported goods are intermediate goods but are also put on the tariffs, thus increase the cost of production for domestic companies. Besides, the government wants to let consumers to burden the extra cost on imports caused by the rising in tariffs. As the trade war broadens and deepens, economic-growth forecasts around the world are darkening (Frankel).
Amadeo, Kimberly. “US Trade Deficit With China and Why It's So High” The Balance Small Business, The Balance, 18 Jan. 2019. Web.
In this article, Kimberly gives the data of the current US trade deficit and brings the cause and the effect of why US has large amount of trade deficit with China. He also talks about the relationship between the imposed tariffs and the trade deficit.
Amadeo, Kimberly. “Why Trade Wars Are Bad and Nobody Wins.” The Balance Small Business, The Balance, 7 Feb. 2019. Web.
Kimberly is focusing on the overall effects of the US trade war with other countries in this article. He states the historical instance of 1930 smoot- Hawley Tariff that actually worsened the Great Depression. Then he talks about the current situation of the trade war. He also come up with the idea that how the trade war will affect the ordinary being and argue that the trade war is bad and nobody wins.
Frankel, Jeffrey. “Trump's Trade Wars and Brexit Are Making Us All Poorer | Jeffrey Frankel.” The Guardian, Guardian News and Media, 27 Nov. 2018. Web.
The main idea of this article is that Trump’s protectionism is hurting the US trade balance. America is trying to gain in economy based on other countries lose. This would not be sustainable because if the income growth of US trade partners slows, they will buy less from the US. And dollar are appreciating against other currencies, cause US exporters become competitiveness.
Lechthaler Wolfgang, and Mileva Mariya. “Who Benefits from Trade Wars?” Intereconomics, Intereconomics, 1 Feb. 2018. Web.
Author talk about the relationship between the protectionism and workers by using a dynamic model. And the overall effect of protectionism is negative. Although protectionism will benefit the unskilled workers in the short term, but it will hurt the skilled workers in the long term.
Ikenson, Daniel. “The Trade Deficit with China Hit a New Record, and That's OK.” Washington Examiner, 15 Jan. 2019. Web.
This article talks about the current US trade deficit and the reason behind those number. And Trump didn’t appreciate the fact that trade deficit is an advantage that signals the foreigners US is a safe and potentially lucrative destination for their savings.
