ECO535 Wk 6 Apply Summative Assessment International Trade Evaluation

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Amber Bowden Due: 1/9/2024 ECO/535 Week 6 - Apply: Summative Assessment: International Trade Evaluation Trade policy in the United States as various policies regarding international trade continue to change in the United States, and multinational corporations must mitigate the risks emanating from non-compliance of these regulations. Such measures to mitigate the risks include ensuring that their shipments and commodities exported to the United States comply with trade policies. Trade policy in the U.S has varied dramatically over the past several years and in different administrations. Over the past two years, the United States trade policy has been continually changing, thus culminating in uncertainties about the future of some multinational enterprises that largely depend on the United States market. For instance, “President Trump’s trade policy, laid out in his Trade Policy Agenda of both 2018 and 2019, is much more aggressive than those of his predecessors” (Mildner & Jansen, 2020, par.6). According to a recent change in trade policy, there no need to conduct trade that makes international competitors stronger or weaken the economic status of the United States. For this reason, many multinational corporations have been accorded limited access to the United States market. This has resulted in a number of adverse effects to these multinational corporations, including dwindling profits. Further, as informed by Mildner and Jansen (2020), there has been aggressive enforcement of the United States trade law over the past two years. This enforcement is aimed at eradicating trade practices that are considered unfair. By utilizing such trade law, the U.S imposed trade policy changes that led to strict quotas and tariff over countries that deny the United States her rights to free trade. This has led to a significant effect that has resulted in huge losses on multinational corporations. For instance, the Trump administration over the past two years has implemented a total of 232 tariff on aluminium and

steel as well as the imports from China thus significantly impacting multinational corporations (Mildner & Jansen, 2020). As informed by the Wall Street Journal, most credible economists are pessimists “that the current administration’s trade and tariff policy change will have long-term economic benefits” (Torry, 2019, par.1). In the latest survey conducted, nearly 73% of economists do not anticipate any long term gain from the trade and tariff policies changes. They broadly state that the most potential impact on the long-term emanating from trade disputes from Mexico and China, which have resulted from the trade and tariff policy change imposed by the U.S government will be uncertainty for businesses, consumers, and financial marketers. This is primarily because such tariff raises the prices of commodities and also reduces the availability of various goods in the United States market significantly. Further, these trade and tariff policies change will adversely impact the consumers in the essence that there will be reduced employment and lower-income (Torry, 2019). Additionally, credible economists believe that the long term effects of trade and tariff policies change will be detrimental to the country’s economic status in the long-term. According to York (2018), “ the effects of each tariff will be lower GDP, wages, and employment in the long run. The tariff will also make the U.S. tax code less progressive because the increased tax burden would fall hardest on lower- and middle-income households” (par.6). Notably, tariff achieve this effect through a few channels, including the passing of tariff to consumers and producers in the form of elevated prices of various items that are imported. This higher prices emanating from a tariff will ultimately lower the value of after-tax of both capital and labour income. This will make the American business persons invest and work less, thus resulting in lower outputs (York, 2018).

Trade policies define laws that are related to the exchange of services and goods. Tariff, on the other hand, are taxes imposed on exports or imports between sovereign countries. The main objective of the recent changes in the trade and tariff policies is to safeguard the local industries across the United States. However, these policy changes have had a significant impact on various employers across the country. For instance, in the cases of a business person I know, trade and policy changes have led to considerable losses in his business. As a result of the policies change, he was forced to raise prices on some of his most purchased commodities. This had an adverse impact on his connection to customers, which led to reduced profits. Further, since he was running a small local business, he was not able to meet some of the increased commodity costs. This resulted in lower-income generation and also a reduced salary to his employees. Besides, as one of the measures to prevent further losses, he had to suspend some of his employees to stay afloat in the business industry. However, beneficial this act was considering the sustenance of the business in the market; it was also detrimental to him as an employer and the remaining workers. This is because the tasks that were initially carried out by more employees now had to be distributed among the few remaining workers, which ultimately overwhelmed them.

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References Mildner, A., S & Jansen, L. (2020). “America First” – U.S. Trade Policy under President Donald Trump. Retrieved from https://english.bdi.eu/article/news/america-first-u-s-trade-policy- under-president-donald-trump/ Torry, H (2019). rump Tariffs Are Short-Term Pain Without Long-Term Gain, Economists Say. The Wall Street Journal. Retrieved from https://www.wsj.com/articles/trump-tariffs-are- short-term-pain-without-long-term-gain-economists-say-11560440436 York, E. (2018). The Impact of Trade and Tariffs on the United States. Retrieved from https://taxfoundation.org/impact-of-tariffs-free-trade/

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