The Global Economy

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The Global economy
By (Name)
Course
Instructor’s Name
Institutional Affiliation
The City and State
The Date

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Question 2
In the year 2015, the US started having protectionism sentiments. However, even
in the global free trade system there has always been existence of the protectionism policy on
trade (Acemoglu 2009). The period of 1990's witnessed arise in the non tariff barriers though
tariffs on trade in developing and advanced economies have been declining since the 1980's. The
US protectionism policy focuses on import restrictions and high tariffs on imports aimed at
reversing the impacts on import prices and increasing the value of the currency. Protectionism
ranges from offering subsidies to exporting companies, tariffs imposition to increasing non tariff
barriers. The policy of trade protectionism in economics enhances the overall competitive
advantage of domestic industries or producers when compared to the foreign ones. The desire to
increase the overall competitiveness levels of US industries is the idea behind trade
protectionism (Aichelle, R., Felbermayr G., Heiland, I 2016).
The US has realized that it can increase her overall industrial market share and at the
same time create more employment opportunities for the population through restricting Chinese
goods. Also, the desire to increase the overall revenue generated by the economy may also be
behind trade protectionism (Bhagwati 2009). It is important to note that an increase in the level
of tariffs has a multiplier effect on the Chinese exporters trading costs meaning that higher retail
prices are charged on the imports. This will automatically result into higher prices leading to low
demand.
The United States of America has a high trade deficit mainly emanating from her trade
with the people's republic of china. It is very clear from the above provided table that the United
States of America for the past five years has been importing more from china than exporting

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(Brasher and Perlez 2018). Meaning that the overall balance of payment position between these
two countries has been deteriorating. In other words, the people’s republic of china has been the
main beneficiary of the free trade between the two countries due to her high levels of exports
compared to imports (Dunn 2015). Therefore in a bid to encourage domestic consumption of
locally manufactured products, the United States of America has seen as strategically and
economically relevant to impose high tariffs on Chinese imports as a way of discouraging
importation from china. Therefore the above protectionism strategy has been found as very
necessary in promoting the overall economic development and might of the US economy
(Aharon, D.Y.; Gavious, I.; Yosef, R 2010).
Further, in some sectors like steel china has a comparative advantage against the US
which to some extent posses huge threat to the overall security of the US. Also the dollar and
Yuan currency manipulation is another factor bringing about the protectionism (Evenett and Fritz
2017). The main reason for the adoption of the protectionism policies like tariffs on the imported
products from china is to counteract the trade deficit between the two countries. The imposition
of such tariffs is aimed at reducing the inflow of imports from china and at the same time
encourages domestic consumption. It is clear as of 2017, there was a 375bn trade deficient in
goods with china by the US. Therefore such calls for protectionism to be effectively addressed.
Policy makers in the US argue that protectionism against Chinese products is vital in
protecting the US economic future. It is imperative to note that the trade protectionism notion in
most cases means or implies growth of domestic business opportunities and enhanced advantages
informs of competition, with limited competitiveness from outside goods and services. This is
important in decreasing the overall deficient of the US on the short term basis (Feenstra e tal
2009).

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It should further be noted the desire by the US administration to put to an end the
increased unfair transfer of intellectual property and technology to china has also resulted into
protectionism. The Chinese has for a long time been involved in the stealing of the US
technology through getting secrets from firms before they are allowed to operate in their country,
therefore protectionism by the US against china is also aimed at resolving the knowledge issue. It
is clear that the stealing of intellectual property contradicts the principles of open and free
market. protectionism inform of tariffs is very important in making imports expensive and
exports cheaper leading to increased domestic production and consumption. The tariffs imposed
by the US mainly affect Chinese products like base ball gloves, food seasonings and others
(Gomory and Baumol 2009).
Similarly, the desire to improve the overall bargaining position of the US is also another
idea behind protectionism against china. The US is interested in attracting jobs and capital into
its economy. It is important to note that according to economic theory, tariffs are collected as a
tax on imports. The efficiency of tariffs is felt in narrow cases when it is used to effectively off
set subsidies of the government which encourage the creation of relatively cheaper exports to the
economy of the US. There also used in boosting economic growth or preventing against cases of
dumping.
Protectionism strategy aimed at favoring the domestic industries against the external
producers. It is one of the pillars of the mercantalistic philosophy that aims at limiting imports
and encouraging exports through various forms of protectionism. As a way of encouraging
exports, china has often devalued her currency meaning that when compared to the US, china's
currency is low artificially. Therefore, given that china's products are more cheaply compared to
that of the US, the US has seen as a critically relevant to increase the overall levels of tariffs and