Impact of Foreign Trade on American Economy

This article discusses the impact of foreign trade on American economy, advantages and disadvantages of import, tariffs, NAFTA, FTAA, Transatlantic Free Trade Agreement, Trans Pacific Partnership and more.

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ANSWER 1
The ability of an economy to produce more gods and services at a much low cost than
the trade partners can be termed as comparative advantage. On the other hand the marginal
opportunity cost is an economic term which examines the impact of selling any additional
units of a product on the costs of the business (Aaronson, 2015). The marginal opportunity
cost also analyses the opportunities that the companies give up in order to produce more
products. Importation can also help in creating more jobs on a large scale. Imports will also
increase economic activity which also helps in supporting millions of jobs in the United
States of America. Increase in imports means introducing new products to the market.
Therefore, American consumers faces advantage in the sense that there is an availability of
new products for them in the market. Another advantage of import is it also reduces the
manufacturing cost.
Answer 2
Tariff is a type of custom taxes which the government levies on the imported goods.
In case of United States, the U.S Congress sets the tariffs on imports. Tariffs works in a way
by rising the price of the imports. However, tariffs can also act as a barrier to the international
trade. When the American government places a tariff on an imported good, it helps in
promoting American products (Mastel, 2016). The reason behind this is that when similar
products of similar price are produced by the American companies the foreign products
become quite expensive. Then the consumers opt for the cheaper option of the American
product. Tariff can also help in the revenue of the government. The government collects
revenue by implementing tariff so that it economically support the function. Therefore, tariff
helps the government to collect government revenue.

However there are also presence of several disadvantage in tariffs on imports. One of
the disadvantage is that tariff is known to discourage trade. The reason behind this is that
when the consumers of America buy cheaper American products, the foreign producers had
to reduce their prices in order to compete with American products. Therefore, the foreign
producers then will not trade with US. This will cause reduction in trade which also ,means
the workers will be losing jobs. Reducing imports due to tariff means the consumer choice is
also reduced. When tariffs are imposed, reduced trade will reduce the individual’ choice of
choosing from a wide variety of products.
Answer3
The North American Free Trade Agreement is a three country grant which is
negotiated by the governments of Canada, Mexico and the United States which entered into
the force from 1994 (Draper, 2017). Its main objective is to encourage the economic activity
among the major economic powers of North America. NAFTA had affected the workers of
the US in many ways. It caused a loss of 700,000 jobs when production moved to Mexico.
Most of the workers who lost their jobs in NAFTA had suffered permanent loss of income.
The Free Trade Area of the Americans is a scheme which was developed in order to
eliminate any barriers in trade among all the countries of America excluding Cuba
(Aaronson, 2015). It is an arrangement which takes place within two countries under which
they agree to remove the barriers of trade. Countries usually forms FTA s for a number of
political and economic reasons.
The Transatlantic Free Trade Agreement is a proposal which is used for creating a
free trade agreement which covers both Europe and North America that is the both sides of
the Atlantic. This type of agreement will benefit for both sides of trade.

Trans pacific partnership is a proposed trade agreement which takes place between the
countries of Australia, Canada, Chile and many other countries. The Trans Specific
Partnership is an agreement that is present between the United Sates and eleven other
countries which borders the Pacific Ocean.
This agreements are usually made to reduce any kind of trade barriers present in the market.
Free trade agreements can also result to immense environmental damage
Answer 4
Americans will benefit from the foreign trade in various ways. International trade will
provide Americans access to various kinds of goods that is not available every time (Draper,
2017). When foreign trade will not take place then, the potential market of the company will
become limited. There will be also reduction in market fluctuations.

Reference list
Aaronson, S. A. (2015). Trade and the American dream. University Press of Kentucky.
Draper, T. (2017). American business and public policy: The politics of foreign trade.
Routledge.
Giddens, A. (2018). Globalization. In Sociology of Globalization (pp. 19-26). Routledge.
Mastel, G. (2016). Antidumping laws and the US economy. Routledge.
Nevitte, N. (2017). The North American Trajectory: Cultural, Economic, and Political Ties
among the United States, Canada and Mexico. Routledge.
Rugman, A., & Verbeke, A. (2017). Global corporate strategy and trade policy. Routledge.