What are the implications of offshoring to the American econ

What are the implications of offshoring to the American economy for the future?

Solution

Implications of offshoring to American economy:

- Because of the globalization offshoring became very much famous in US and other nations but slowly USA realized that offshoring did the damages to own economy as benefits from it expected. USA business has done offshoring in order to reduce the production cost and to raise the rate of profits by selling those low cost product in USA, but now when they are bringing back that production to the home the most affecting factor would be wages the worker received. It will get disturbed as work will get much higher than before and wages demand will increase in market for local workers.

- Competition in local marker would be neck cutting as the business who were enjoying slight upper hand in cost by offshoring will now have to raise price and they will no longer dominate the market will lower price than its competitor. In order to stay in competition one has to reduce price and lower the profit, which will increase the local competition.

- The tax rate would be issue for the business who has offshored their productions as current tax rules offer lower rate in investment with overseas company while tax rate for domestic business is higher than overseas investment, so there will be tax distortion in economy for business owners.