Question

Please answer the following question with correct grammar.

If there is no free trade in the US, it benefits the domestic businesses, more jobs for US citizens, etc. What are the benefits of protectionism and limited trade for the US economy?

Answer 1

Trade protectionism is defined as a nation, or sometimes a group of nations working together as a trade bloc, creating trade barriers with the specific objective of protecting their economies from the potential dangers of international trade. This is the opposite of free trade in which a government allows its citizens to buy goods and services from other countries or sell their goods and services to other markets without any government restrictions, intervention or barriers. Trade protectionism's aim is to protect the essential economic interests of a nation such as its key industries, services, and workers ' jobs.

The EU subsidizes its own farmers and bans imports from outside the EU of cheap agricultural products. The currency of China is artificially low, making exports cheaper–long the source of friction between China and the US. And Japan helped develop its industries with cheap loans, as well as imposing heavy import tariffs, prohibiting international investors from buying domestic firms, and even launching local campaigns to persuade its population to buy Japanese products instead of imported goods. To be fair, Japan has abolished most of these restrictions now, but it did so only when its goods were still highly competitive.

The theory of Game Theory reflects another clear argument in favor of protectionism. If your rival countries offer their industries protection anyway, then you should also offer your industries protection. For instance, if the US government indirectly subsidizes the American aircraft manufacturer Boeing, then EU countries also have a strong case for retaliating and considering subsidizing the European Airbus company. If not, Boeing would eventually gain a much higher market share that, in effect, could drive Airbus completely out of business.

Faced with the weakening impact of rising inflation, the US central bank, the Federal Reserve, may need to raise interest rates more rapidly in order to limit the harm. Subsequently, higher interest rates will further reduce the American consumer's buying power and reduce foreign investment. However, it is also possible that U.S. trading partners would respond in kind, thereby weakening demand for American products to the detriment of U.S. exports and the companies that manufacture them.

When American companies agree that the new policies will improve American goods ' demand rather than exports, they will have an incentive to invest in their manufacturing and employ locally. However, if Trump's threat of introducing large tariffs is believed, there will be an opportunity for many foreign firms currently producing outside the US to move within its borders. Employment levels, incomes, consumer and business spending and trust will continue to rise, causing even more inward investment.