Benefits of Trade n Chapter 3 you all learn that countries b

Benefits of Trade n Chapter 3, you all learn that countries benefit more from trading with each other than not trading. In recent news, our current administration would like to change the way we are trading with our neighbors in North America and abroad on certain goods like steel. Do we have an absolute or comparative advantage on any of these goods? What economic effects could that have on the US and other countries?

Solution

Recently Trump administration is following the policies of protectionism. They have imposed tariffs on steel and aluminum products from various countries that export these products to USA. There are very high chances that this may lead to the trade wars between the biggest economies of the world.

The USA neither have absolute nor have comparative advantage over the steel and aluminium products. The economic effects of these measures on USA will be that its consumers will have to now shell extra bugs to buy these products as their prices will increase. Though the domestic producers of these goods will have some advantages in producing these goods as they can now compete with global manufacturers now. For others world exporting countries, their exports will become expensive, so can decrease their exports.

The USA is using this measures to balance its trade deficit with most of these exporting countries like China etc.