Comprehensive Report: Protectionism, Trade Wars, and Global Effects

This report provides a detailed analysis of protectionism, focusing on the effects of tariffs, trade wars (particularly between the US and China), and their consequences on the global economy. The report begins with an introduction to tariffs, explaining their impact on consumer and producer surplus, and the logic behind their implementation. It then examines the specific case of tariffs imposed by the US on steel and aluminum, including the retaliatory policies implemented by other countries. The report further delves into the US-China trade war, discussing its causes, the imposition of tariffs, and the resulting negative effects on various industries and consumers. The analysis extends to the justifications for protectionist policies, such as the fledgling industry argument, anti-dumping duties, and the protection of domestic industries. Finally, the report concludes with an assessment of the trade war's impact on the rest of the world, highlighting the decline in real exports, GDP, and the overall disruption to global trade and economic growth. The report references relevant academic sources to support its claims and provides a comprehensive overview of the complex issues surrounding protectionism and trade wars.

Running Head: PROTECTIONISM
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Introduction
PART A
Improvement in Tariffs has descriptive effects which are affect the general economy.
When tariffs are introduced, some individuals and organizations make more profit while others
make loses. The way profits and losses are divided is crucial. The logic behind the
implementation of tariff policies can be explained by understanding the logic of collective action
(Rugman & Verbeke, 2017). With the imposition of a tariff policy, there will be a loss in
consumer surplus and hence the consumers in the importing country are worse off. The domestic
producers on the other hand will be better off due to increase market scale and hence they will
enjoy the economies of scale. There will be also a benefit to the government due to the increased
government tariff revenue. There will also be a net loss in the economic welfare since the total
surplus in the market will lead to a decrease as a result of a deadweight loss. The diagram below
shows the quantity of steel imported by USA before and after imposition of tariffs and the
economic welfare.

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(Draper, 2017).
Pleasing the case of tariffs imposed by Trump in the US on aluminum and steel from
10% to 25% had some impacts on the US economy. According to Morgan Stanley, the total
imports included 4.1 percent of steel and aluminium. The improvement led to an extension in the
European Union, Mexico, and Canada. Canada introduced matching retaliatory policies in 2018
(Draper, 2017). Other states, such as India, introduced trade consequences of $241 million and
$1.2 billion on Indian steel and aluminium. India also imposed a tariff of $240 million worth of
U.S. goods.

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Trump’s office announced to use an excessive hopelessness time program, commodity
Credit Corporation, which was to pay farmers $12 billion. The payment was aimed to
compensate farmers who had made burden sales due to the trade war and retaliatory policies
which were imposed by the European Union and other countries (Kee, Neagu, & Nicita, 2013).
PART B
The trade war between China and the United States was caused by Trump's imposition of
tariffs in 2018 and was characterized by exchange negotiations which ended without an
agreement and caused frequent retaliation with rising tariffs on the two sides (Irwin, 2017). The
disagreement between the two states hurts U.S. industries and farmers. The latter made Trump
allocate billions of dollars as an aid of the result.
Tariffs concession between the U.S. and Northern America remained positive, the office
of Trump rifted aluminium and steel on Mexico and Canada in 2019, leaving Argentina and
Australia being the individual nations from the regulation (Davenport, 2017). Trump introduced
a 5% tariff on all goods imported from Mexico and another 5% every month for three months so
that illegal migrants from Mexico could stop entering America. The analysis which was carried
by CNBC 2019 concluded that Trump tariffs were one of the largest tax inducements in the
United States history (Johnston, 2013).
After Trump tweeted in 2018 that ‘when a country is losing many billions of dollars on
trade with virtually every country it does business with, trade wars are good, and easy to win,'
the tweet escalated policies on the imported product from China and this lead to a trade war. As a
result, the partners were angered to implement tariffs on U.S. goods (Kee, Neagu, & Nicita,

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2013). China implemented the retaliatory tariffs of U.S. goods to $34 billion tariffs to counter the
duty imposed by the U.S.
Trump's plan to increase the number of tariffs on Chinese goods by 25% resulted in
several consumers and businesses being affected. However, due to the existence of substitutes
and import sources and the competitive prices between the two states, China lowered tariffs for
other importers, while those of U.S. were raised. The negative effect of these tariffs between
china and U.S. trade war is difficult to measure. There are no signs of the war ending anytime
soon (Kee, Neagu, & Nicita, 2013). It is also challenging to declare any country a winner since
this is a matter of party-political gamesmanship.
PART C
Protectionism policies are typically aimed at imports and can also involve additional
features of global trade such as administration subsidies and product standards. People argue that
protectionism is intended to trigger price inflation, lower economic growth, and make the market
to be a free trade area (Kee, Neagu, & Nicita, 2013). Proponents of protectionism claim that the
tariffs have an advantage of creating domestic jobs, making the local budget more inexpensive,
and rising gross domestic product. Three key import tariffs justifications can be theorized for
protective actions.
Fledging Industry Argument
Businesses possess comparative benefit but have not further exploited economies of
scale. Short term defense give room for industries to develop their interests to a point at which
protection could be relaxed, making the businesses to trade freely on the world-wide trade
(Rugman & Verbeke, 2017).

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Anti-Dumping Duties
It refers to price discernment where products are deserted when sold for transfer at a
lesser price than their average value. In the short term, consumers have an advantage of buying
goods at a lower price from the foreign sellers but in the long run, undercutting the prices may
force the domestic manufacturers out of the business which leaves the foreigner as a monopoly
(Rugman & Verbeke, 2017).
Protecting Domestic Industries
Imposition of tariffs makes goods cheaper for the local consumers and makes the
imported commodities more expensive. The domestic government argues that imposition of
tariffs reduces the level of competition from foreign competitors. (Rugman & Verbeke, 2017).
PART D
Effect of Trade War between the U.S. and China on the Rest of the World
The trade war between the U.S. and China resulted in no winners between the global
trade and economic growth. All countries which are facing new tariffs, including China and the
U.S., are experiencing a fall in real exports and GDP. The countries that were affected by the
changes in these tariffs had their GDP affected in several ways. Trade wars can improve
revenues and hence lead to an increase in GDP. Trade wars lead to the loss of corporate profits
and this leads to decrease in the level of GDP. Apart from these two states, the other countries
are in weak demand for their exports, either through response to poor global economic growth or
through supply chains. In the protectionism side, the level of real global GDP fell with 0.1% in
2018, 0.8 in 2019, and intended to fall by 2.4% by 2020 (Rugman & Verbeke, 2017).

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World trade is more affected by protectionism situation, as states turn inwards and
international industries move goods to the end markets to maintain the competitive. The United
States of America faces a significant fall in real imports of commodities and services relative to
the baseline level (Rugman & Verbeke, 2017). Due to high imports contents of its exports, China
also experienced a substantial decline in the real imports.
References
Davenport, M. (2017). Trade Policy, Protectionism and the Third World. London: Routledge.
Draper, T. (2017). American business and public policy: The politics of foreign trade. London: Routledge.
Irwin, D. A. (2017). The false promise of protectionism: why Trump's trade policy could backfire. Foreign
Aff, 45(3), 95-96.
Johnston, C. D. (2013). Dispositional sources of economic protectionism. Public Opinion Quarterly, 77(2),
574-585.
Kee, H. L., Neagu, C., & Nicita, A. (2013). Is protectionism on the rise? Assessing national trade policies
during the crisis of 2008. Review of Economics and Statistics, 95(1), 342-346.
Rugman, A. M., & Verbeke, A. (2017). Global corporate strategy and trade policy. London: Routledge.

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