International Trade and Foreign Exchange Rate Essay
International Trade and Foreign Exchange Rate
This speech will discuss several topics concerning international trade and finance. The first topic of discussion will explain what happens when there is a surplus of imports brought into the United States, and the specific example used will be China trade surplus as it jumped in July 2012. China exports to the United States rose 13.6% to $165.3 billion and their exports to Europe fell 0.8%. The increase in the surplus of imports causes businesses to have more products to offer consumers, lower the prices of the products, and leads to consumers purchasing more products. Purchasing more products increases the revenue for businesses, and causes major movement of money. The next topic that will be discussed is the effects of international trade to GDP, domestic markets, and university students. International Trade helps our government and markets earn income from foreign countries.
International Trade affects university students by offering school supplies such as computers more affordable because they are made and sold at a cheaper rate. University students are able to achieve a higher education when the school supplies are produced in a domestic market where the college student resides, and leaves the student more money for tuition. A government choice on tariffs and quotas has different affects on international relations and trade. A tariff is simply explained as a tax that increases the cost of all imported goods. Any country can impose a tariff on any good, for example if China believes that the United States has wronged them they can impose a tariff on shoes imported from the U.S which will raise the price of shoes. An import quota is when a country limits the amount of products on any particular item that is imported. An example of the effects of an import quota is when North Korea test fired a long range missile the U.S stopped all imports from that country which causes a decline in that country’s economy.
The foreign exchange rate is the price of one countries currency compared to another country. An example of the foreign exchange rate is the Euro is priced at $1.3359 compared to the U.S dollar, which simply shows that one U.S dollar is $1.40 Euro. The foreign exchange is determined by the amount of currency purchased and sold in that country. The United States would not put a restriction on goods coming from China because it would cause an economic collapse. A restriction on goods coming from China would affect the tariff on goods and create a negative impact on Chinese investments, and all supply chains operated by American companies. The United States knows that restricting goods from China would cause a major decrease in employment throughout. The less goods that is imported means the less goods that are produced.
The fewer goods that are produced means that a smaller workforce is needed to produce those goods. The smaller workforce that is needed to produce those goods means a higher unemployment rate, and less money taken home through pay. The less money and high unemployment rate leads to less money to put back into the economy. The United States does not restrict the amount of imports from any country, but is now trying to influence U.S companies to buy products made in the United States. Wal-Mart this week has pledged to buy $50 billion dollars of U.S made products over the next ten years. The decision that Wal-Mart has pledged to do will increase the U.S economy in several different ways. Buying goods that is produced in the U.S would increase employment within the country, and save the company from an increase in import prices that has been rising.
The cost of labor in China has been rising and other companies such as Apple and General Electric are announcing that they are bringing production back to the United States. The current economic crises in the United States have caused the Government, and private companies to make drastic changes measures to increase our economy. The U.S offers companies tax credits for building U.S companies, and hiring full time employees. The U.S also gives small businesses tax incentives if they agree to invest in creating new jobs. In the past recent months the U.S has extended unemployment benefits, lowered taxes for the poor and increased taxes for the rich to help stimulate our economy. In order to help our economy rebound imports, exports, job creation, and tariffs are key elements.
Calvo, Guillermo. 1998, November. “Capital Flows and Capital Market Crises: The Simple Economics of Sudden Stops.” Journal of Applied Economics 1:35–54.
Deininger, Klaus, and Olinto. 2000. “Asset Distribution, Inequality, and Growth.” Policy Research Working Paper 2375. World Bank, Washington, D.C.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 11 January 2017
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