Macroeconomics: Examining Trade and Comparative Advantage in US

This essay provides an overview of trade and comparative advantage in the United States, highlighting the country's strengths in exporting goods like petroleum products, pharmaceuticals, and services such as travel and finance. It also examines trade barriers implemented by the US, including import tariffs and quota restrictions, aimed at reducing trade deficits. The essay further discusses the pros and cons of these trade barriers, noting their potential to protect domestic industries and generate revenue, but also acknowledging the social distortions and slower economic growth that may result from increased protectionism. Desklib offers a variety of study tools and resources, including past papers and solved assignments, to support students in their academic endeavors.

Running Head: MACROECONOMICS
Macroeconomics
Name of the Student
Name of the University
Author note

1
MACROECONOMICS
Table of Contents
Overview of trade and comparative advantage in United Sates......................................................2
Trade barriers in United States........................................................................................................2
Pros and Cons of Trade barriers......................................................................................................3
References........................................................................................................................................4

2
MACROECONOMICS
Overview of trade and comparative advantage in United Sates
Comparative advantage theory is imperative to international trade theory. The theory
suggests that in trade between two nations a country should export goods and services in field of
their relative expertise reflected from a lower opportunity cost (Watson, 2017). While country
imports goods that has a relatively high opportunity cost. United States being one of strongest
economy in world enjoys comparative advantages in several products and is a powerful member
in international trade.
The good in which US enjoys most competitive advantage over other nations is
petroleum products. Other goods that USA exports in the ten-year period (2006-2016) include
Pharmaceutical preparations, industrial machines, telecommunication equipment, computer
accessories, medical equipment, civilian aircraft and others. The major service exports of United
States are travel service, financial service, computer and business service. United States import
industrial equipment and machinery, consumer goods, automotive vehicles and a small fraction
of food, feeds and beverages (census.gov, 2018).
Trade barriers in United States
USA’s import exceeds its export leading to a trade deficit in balance of payment. In 2016,
the trade deficit accounted in US stands at $502 billion. In order to restrict import USA uses
trade barriers in forms of import tariff and quota restriction. The tariffs and import duties are
revised continuously. USA maintains tariff barriers for a number of products such as textiles,
leather goods, ceramics, footwear, railway cars and glass (Francois et al., 2015). USA also uses
quota enforcement to reduce import.

3
MACROECONOMICS
Pros and Cons of Trade barriers
The protectionism measures protect domestic industries and create new employment
opportunities. Tariff earns revenue for the government that can be used to support domestic
industries. The main disadvantage of tariff and import quota is the social distortion created from
both measures (Irwin, 2015). Increase in US protectionism measure further contributes to a
slower growth of economies by declining US competitiveness.

4
MACROECONOMICS
References
Branch, F. (2018). Foreign Trade - U.S. Trade with . . Census.gov. Retrieved 12 February 2018,
from https://www.census.gov/foreign-trade/statistics/highlights/toppartners.html
Watson, M. (2017). Historicising Ricardo’s comparative advantage theory, challenging the
normative foundations of liberal International Political Economy. New Political
Economy, 22(3), 257-272.
Francois, J., Manchin, M., Norberg, H., Pindyuk, O., & Tomberger, P. (2015). Reducing
transatlantic barriers to trade and investment: An economic assessment (No. 1503).
Working Paper, Department of Economics, Johannes Kepler University of Linz.
Irwin, D. A. (2015). Free trade under fire. Princeton University Press.