International Trade in Microeconomics

What is international trade? International trade is “The practice, in a market economy, in which individuals provide goods and services to others and receive goods and services in return.” (Microeconomics textbook G-8). One controversial topic that is relevant today dealing with international trade is Trump hitting China with tariffs. Trump has tried to negotiate with China to make trades “fair” for the U.S. when China didn’t agree with changing the trade policy, Trump decided to start a trade war with China.

Trump has shown no signs of backing out of the war and is said he’s prepared to tax all imports. Trump wants Americans to buy American made products to build up the economy in the United States, the reason trump is placing such high tariffs on China so that Americans won’t spend a lot of money on products made overseas and will just buy the product that is made in America for a better price. Trump wants to “Make American great again”.

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The tariffs that Trump has placed on China are meant to pressure them to change their long-term trade policies, because Trump says that they are hurting American business. The Unites States is in the “lowest unemployment rate since 2000” (NY times). Which is not good for us Americans.

New York Times states, “China could win relief from the tariffs by acceding to the administrations trade demands, including allowing Americans greater access to the China market.” The United States only wanted to continue doing trade with China if they are going to take the trade negations serious.

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The tariffs were meant to hurt China, but it could backfire and hurt American consumers by raising the prices on everyday consumer goods. One problem that Trump came a crossed while setting the tariff prices were that America would be taxing products that Americans could not recreate. Americans would be paying the taxed price for the Chinese made goods because it was included in the tax that Trump put on China. Trump says he is willing to drop the trade war if China will agree to his demands. According to Washington’s few they think that threatening to raise the tariffs on China make them more reasonable to negotiate, but no, that’s not the case. New York Time states, “The evidence that, in response to U.S. bullying tactics, China just stiffens its spine and strikes back with proportionate tariffs against U.S. imports has had no discernible effect on the Trump administration’s take-no-prisoners approach to this rapidly escalating trade war.” Meaning that China Is not that soft and is not willing to back down for now.

China wants to attack the United States American companies that rely on Chinese imports such as “phones, cars, televisions, and other products” (NY times). China said that they would put “similar tariffs on $60 billion a year of American goods in response to the threat from the United states. China’s finance minister said that if necessary, he could hold back exports to the U.S that are vital to American company supply chains. Mr. Lou says that it “would take years for American companies to find alternatives to China. Basically, China is saying without imports from them that Americans would suffer and finding a replacement for some of those products that are crucial to American companies would be merely impossible. Honestly the tariffs are doing more harm to Americans than Trump thinks. The taxes, “By choosing to unilaterally raise taxes on Americans, the cost of running a farm, factory or business will grow. In many cases, these costs will be passed on to American families.” (NY times). The taxes are going to end up hurting Americas consumers and do barely any change to China’s trading policies. Trump had a good intention by wanting to increase Americas economy by having not so many imports from China because, in the end China’s economy just continues to grow because of the money that Americans pay for the Chinese imports. The taxes ended up not being the smartest move for Americans, because it did more damage to us than they did to China and their economy. International trade is very important to the well-being of America because it regulates all products in America and helps consumers get the best price possible for the same type of goods. International trade benefits both countries by allowing both countries to consume more.

This article connects to international trade, because it shows an example of how two countries have to work together and have agreements on things, they would like to trade between one another. In the case with America and China, China didn’t want to give into what Trump was asking of them and trade their old ways and their trading policies, since they didn’t want to agree with Trump, he decided to start taxing all their goods that were imported into the United States so that the American consumers wouldn’t want to pay the ridiculously price for the same item that was also American made for cheaper, Trumps intentions were to help the American economy grow and become more regulated. The Chinese didn’t like that their goods were being taxed so they taxed back and threatened to cut off some of our vital imports from China. The tariffs had a good intention to help regulate U.S economy, but It didn’t work out that way, we need to have international trade with other countries in order to be able to have the items we have today, there are so many products that the United States cannot legally replicate, in that case we need China’s imports. As the textbook states, “imports and exports have taken on an increasingly important role in the U.S. economy.” The text also talks about how over the last fifty years, both the imports and exports have grown faster than economy itself. Without International trade the United States wouldn’t have half the products we have available to us here in the states, and other countries wouldn’t have stuff from the states available for them out there.

The new trade agreement between Canada, The United States and Mexico is another great article that connects to international trade, for short it’s known as either the CUSMA or the USMCA. This new agreement between them has replaced what we all knew as NAFTA, what exactly was NAFTA? NAFTA has generated economic growth and rising standards of living since 1994. When NAFTA was created it was the biggest free trade region in the world. They created NAFTA so that they could remove the barriers to able to trade amongst the three of them. With the new agreement switching from NAFTA to USMCA, the new agreement brings, “new rules for cars and trucks, and labor and IP protections” (The Washington post). The new agreements have lots of new changes for cars, Trump wants more parts for the cars and trucks to be made in North America, the car or truck is to have said to have more than 75% of its parts be made in either Canada, Mexico, or the United states. (info from the Washington post). Trump also says that anyone working on the vehicle for a certain percent needs to be making at least $16 an hour. With the new agreement car prices have the possibility to rise, and some smaller vehicles may not be made in North America because of the price expense will cost too much to make that vehicle than it’s worth.

Trump also had a “Victory” of winning over Canada’s high tariffs on their dairy products. They negotiated for Canada to adjust their prices so that now they can have a greater “market share” with U.S. farmers, and we will be able to export more powered milk products to Canada. Mexico and Canada got of Trumps “auto tariffs” list and now they will be able to send auto mobile parts for free. A debate between Canada and the United States was that Canada wanted to do away with trumps tariff on Candian steel but for now Trump gets to keep his tariff on it. The USMCA is also trying to improve labor and environmental rights for when the Mexican truck borders come across the border that there will be more safety precautions in place for them. They have now given leaders and legal experts more protection on their patents and trademarks, which were said to have been asked multiple decades ago. Larger drug companies and pharmacies will now be allowed to sell in Canada with market protection. One of the agreements placed in the USMCA is that the agreement will have to be reviewed and revised after 6 years and then will continue for the full extent of 16 years, Trump says the reason he wants to have the 6-year checkup is so that they are able to make revisions if needed. With the new USMCA in place taking over NAFTA is new and improved and is ready to move on to bigger and better things for the United States, Canada, and Mexico. NAFTA had a huge impact on international trade regulation, and it made a lot of money. With USMCA taking over with its improvements it is hoped to be able to make the trade regulation fairer and more effective for all that are participating in the trade agreement. Just like in the previous article how Trump tariffs on China was trying to help regulate trade and we saw how some imports were just vital to the United States economy, so is regulation with other countries, with USMCA there will be a lot of international trade correlating through the economy and helping each country get the products needed to strengthen their economy. The main purpose of international trade according to economics online is, “Countries trade with each other when, on their own, they do not have the resources, or capacity to satisfy their own needs and wants. By developing and exploiting their domestic scarce resources, countries can produce a surplus, and trade this for the resources they need.”

Trade helps each country function and helps so that they will be able to share the same great products that the other countries can produce when they can’t. It’s an amazing thing, international trade. Without international trade the United States and other countries could’nt produce or replicate products from other countries legally, and even if they could it could possibly increase the price by only having one producer and if the price of the good and materials were expensive, so would the product. For example, if a product didn’t cost a lot to produce in another country but it costed more to make it in the United States it would be because of the limited resources here in the United States, that is considered the opportunity cost of the product. In the textbook “Microeconomics by Paul Krugman and Robin Wells” They provide the example for opportunity cost on shrimp, they say “shrimp- much of which now comes from seafood farms in Vietnam and Thailand. It’s a lot easier to produce shrimp in Vietnam, where the climate is nearly ideal and there’s plenty of coastal… than it is in the United States.(219). With that example in mind its showing that with opportunity cost it is a lot cheaper for a country that has the resources and materials available to them are going to produce products like that and trade them for a better price than if the United States decided they wanted to produce a product like that but they were limited with the resources and materials, it would make much more sense to trade with a country that has plenty available to trade, so then you could provide another country with a product that was difficult for them to produce.

The main point I was trying to get across is that international trade is there to help strengthen each country’s economy by helping give a product to another country that can’t produce it as easy as you can. International trade and trade agreements have been around for decades and will continue to benefit and keep circulating the economy of our country, without it, life wouldn’t be the same! Thank your international trade.

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International Trade in Microeconomics. (2021, Apr 09). Retrieved from https://studymoose.com/international-trade-in-microeconomics-essay

International Trade in Microeconomics

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