Protectionism Policies: Impact on Australia and the USA Economies

This report examines the macroeconomic impact of President Trump's proposed protectionist policies, specifically focusing on the imposition of tariffs on steel and aluminum, on both Australia and the USA. The analysis considers the short-term and long-term effects on macroeconomic equilibrium, including potential shifts in trade, investment, and overall economic growth. The report uses economic principles and diagrams to illustrate the likely consequences, such as changes in prices, trade balances, and the potential for retaliatory measures. It also addresses the exemptions granted to Australia and the implications for Australian businesses, considering factors like supply chain adjustments and the possibility of a broader trade war. The conclusion emphasizes the importance of understanding the implications of protectionism and the need for Australian businesses to adapt to the changing global trade landscape, advocating for diverse imports and lower tariffs.

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The president of the United States of America, President Donald Trump in the recent past
gave a proposal that he will implement a 25% rate of tariffs on the importation of steel and also a
ten per cent on the transportation of aluminium in response to the recommendations on the
matters of the national security. Steel and aluminium that are exported to the USA from Australia
will be exempted from this proposed tariff. The main factor in this decision was the strategic
alliance made by Australia to the USA. This proposal gives a direct signal that if any additional
taxes are initiated soon on other industries, the measures will have a lesser impact on the
Australian exports to the United States.
The tariffs, on the other hand, reveal a higher vitality on the economies as far as the
global trade policy is concerned. The multinational companies in Australia have the right to
assess their chains of supply and hence come up with the developing strategies for them to be
sure that they will be perfect in creating or even reacting to the actions of US adding to the
retaliatory measures that are meant for the non-exempted countries (Schott, 2014).
This protectionist action was the first taken by the USA after her withdrawal from the
transpacific partnership. There will be the yielding of short-term benefits to the economy of the
United States, but the protectionist trading system will have a negative impact on the economic
growth and trade around the globe. To respond to the protectionist move, Canada and Europe
decided to hit back with the same measures on the significant imports to the USA. Canada has
however been excepted from these measures till the next negotiations on NAFTA agreements
take place (Jackson, 2015).

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The European Commission declared that it would respond firmly and join the other
countries and unions in a challenge at the world trade organization. There has been a 25% tariff
already put by the European Union on goods worth USD 3.5 billion that would come from the
USA. Australia has however said that it will not get involved in taking action against the WTO
(Nye , 2016).
Effects to the Australian businesses
As the concerns about the Australian industry go on, the USA president Donald Trump
insisted that the defense allies will be exempt from these measures. Thus, behind Mexico and
Canada’s stand, the Australia steel and the aluminium exports are likely to be excluded from the
proposed tariffs (Nye , 2016). The latter decision comes after the consideration of the longstanding
relationship between the countries. The move recommended by the USA president prosed that if
additional tariffs would be imposed on other industries, then such measures will have no impact
to the Australian exports to the USA, with the major commodities that come from Australia
being beef, aircraft and spacecraft parts and pharmaceutical products.

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The diagram below shows the significance of tariffs and how they affect the economy
(Irwin, 2014).
Tariffs are a good theory but very terrible when put in practice. The theory is aimed at
protecting the domestic industries but practically the broader economy suffers.In the case of the
protectionist tariffs, the prices of goods coming from steel will rise in the entire economy but the
insiders will get the surplus.

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(Schott, 2014).
As politicians are bribed to start protecting every industry, the members of the Congress are
more corrupted by the leaders of corporates to keep tariffs in place, and this is aimed at
protecting the profit margin (Jackson, 2015).
The Australian businesses should look at this exemption with confidence bearing in mind
that the US set a precedent to protect the interest of its allies. The goods are covered by the free
trade agreement which adds a layer of security (Irwin, 2014). Tempering with these positive
overtures is a commentary that will likely suggest that the president will have the power to
decide which country the United States will be trading with and which one the state won't trade
with. In the ongoing political environment, this will trigger uncertainties clearer to the point that
the real law is introduced and discharged (Schott, 2014). Australian organizations with worldwide
activities might be affected by the proposed levies and potential future retaliatory activities by
different nations (Jackson, 2015). Australian business who supply products to the US from
business sectors outside the exempted rundown should asses their worldwide supply chains and
create sourcing techniques to guarantee they can respond rapidly to facilitate potential activities

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by both the US and different nations (Nye , 2016). The size of the retaliatory reaction is one to
watch, as Australia would not uncertainty be uncovered, there is a high possibility of exchange
war break out. Given Australia's dependence on China as a fare goal, an exchange war would
make a situation for Australian policymakers. The need to adjust between financial interests is
tied intensely to the Chinese market and long-standing military, political and commercial ties.
With the US involvement, it would be a confounding element in future discretionary and
exchange relations with the two nations.
The takeaway
President Trump's proposed taxes ought to limitedly affect Australian organizations.
Notwithstanding, the potential for a more extensive exchange war, protectionism is disturbing
and an issue that Australian organizations together with worldwide activities should screen
(Jackson, 2015). Australian organizations should keep on seeking out open doors through their
global supply chains and be skilful because of universal difficulties furthermore, protectionist
arrangements exuding from the US, or somewhere else.
Conclusion
Protectionism is one of the issues that have caused backwardness in most economies
around the globe. Most people who advocate for economy favor the domestic industries at the
expense of the broader economy. It is always advisable to fight against protectionism and
advocate for diverse imports by lowering the tariffs and quotas.

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References
Irwin, D. A. (2014). The False Promise of Protectionism: Why Trump's Trade Policy Could Backfire.
Foreign Aff, 23(4), 67-76.
Jackson, T. (2015). Prosperity without growth: Economics for a finite planet. Routledge.
Nye , J. S. (2016). Bound to lead: The changing nature of American power. Basic Books.
Schott, J. J. (2014). Assessing us fta policy. Free trade agreements. US strategies and priorities, 23(4), 45-
56.