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Jessica Galindo

Econ

March 17, 2019

Sometimes it’s better to walk alone, or is it? In recent times Donald Trump elected to be

the president of the United States. He was chosen by the majority of the electoral population.

One of his major campaign promises was to change the way trade works. He ended free trade

and ended NAFTA. He wants a ‘better deal’ with them. He was claming that the United States

was being taken advantage of by foreign nations in terms of trade. Trump has introduced more

than $600 billion in tariffs to the Chinese and others to other nations throughout the world. My

research topic is regarding the Trump Trade policices and its effect on the revnue streams and

income of the US government.

In some way, Trump does have a point. The United States is being demolished in terms

of imports and exports. The value of the imports to the United States is a lot higher than the

exports. There is a huge trade deficit that is happening and that is helping the national deficit of

the United States grow to higher levels. The claim is that the tariffs would cause policies to

change in the long-run and thus factories and companies within the US will be producing within

the US more, and countries exporting goods would be trading with the US more fairly and thus

buy more products from the US. This means that worldwide people would be getting raises and

the US worker would be getting more jobs and thus be in more demand, thus be getting more

raises as well. Thus is an isolationist policy that tries to do what is best for America and the

American worker. Although specialization is a good thing, Trump feels that the lifestyle in

foreign countries is extremely low that overall the US worker would be negatively affected with
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free trade, because they would have to be completing with people which accept these lifestyles

the US worker otherwise weren’t. He feels these trade policies would address this issue.

Manufacturing is one area where no one seems to be in disagreement over. The eroding

of the manufacturing sector of the United States is the reason of which Trump won the election.

He won states like Massachusets, Pennsylvania, and Michigan (usually democratic states). He is

the only candidate who disliked free trade, an exception to all democratic and republican

candidates. Since 2001 the US has lost about 4.5 million jobs in manufacturing. Everyone is in

agreement in that manufacturing jobs were lost due to free trade. There is no longer a need for

manufacturing workers. This has been improving rapidly since. Manufacturing jobs have been

growing in the United States thanks to Trump’s trade policies.

The issue here is that manufacturers were starting to export their manufacturing. Harley

Davidson moved its production overseas. Car manufacturers such as Ford and Chevrolet were

investing heavily in production sites in Mexico in order to import the products to the United

States. Trump felt that companies were thinking more selfishly and that their sole aim is

increasing profit and not thinking better for the American worker. There are other international

issue which call for the end of free trade too. China does manipulate its currency is it is a hub for

pirated content, if fails to protect it. It potentially doesn’t help with economic innovation.

Even Trump admits that the trade policies implemented could effect the US economy

negatively in the short-run. Other nations are not going to be buying products from the United

States and rather would buy them from other nations. According to economic estimates the

Trump Trade policies in the short run (2019) will cause the GDP of the US to be about $365.1

billion lower than it usually would be. There will additionally be lost production, estimated to be

valued at $915 per person or $2,357 per household. Additionally, almost 3 million jobs will be
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lost and the rest of the worked will see wage growth of lower value. This is quite contradictory to

the rhetoric that Trump had introduced when he was running for president. He claimed he would

be the ‘greatest jobs president ever created’.

There is a concept that is circling in that the Trump administration is pretty chaotic in the

implementation of the trade policies (and being consistent about it) the firms and investors aren’t

buying it, and that is a hindrance to the economy. Trump often claims and threats that there will

be negative trade policies that are implemented but that hasn’t been the case. However,

corporation aren’t able to simply shrug of presidential comments and usually act upon them.

However, his policies do change from time to time and this causes uncertainty and thus investors

aren’t able to implement ideas consistently. For example, there is this concept of paralysis.

Trump expects US firms to build factories in the US and begin producing goods in the US

instead of importing from China and thus build factories and train workers. However, applying

this does not seem to be something which is feasible as the policies of which the government is

implementing is something that is consistently changing continuously.

It is additionally argues that the trade systems cause there to be positive outcomes. With

specialization everyone would be better paying by paying the lowest price possible for the

highest bulk of a product. This is how the balance-of-payments system functions. Tariffs are

things which are rather barriers to trade and actually be something that raises prices overall and

thusly reduce the output economically as well as the incomes. Although tariffs are a direct cost to

importers this will ultimately fall the buyer, as the tariff cost may be passed to the consumers

when buying goods for higher prices than they’re used to. This means that buyers pay more than

usual and business have higher costs than usual, and this causes the output and employment

levels to be lower than they usually are.


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Another concept to consider is the possibility that the US dollar will be appreciating with

tariffs going up. This offsets a higher price the consumer of the United States. This higher dollar

value make it more difficult for exporters to be selling goods to people in the foreign market.

Their revenues will be a lot lower and thusly the slowdown of output will be causing the income

level of the worker as well as the owner of capital to fall. There will be less of a want for a

worker to be working in this economy and less of a want to invest and this will make the

economy be smaller than it is.

One area largely negatively affected by those tariffs is the farming industry in the US.

With those tariffs introduced other nations decided to buy soybeans and other products elsewhere

and the US has thus lost a lot of customers. This has caused the trade to decline. Trump in

response provided aid to them but that aid will not last long and there must be a long-term,

feasible solution introduced in order to end this problem.

Speaking historically, protectionism has not been something that is effective for the

United States. When researching the past and how these policies affected the US market it was

found that this has only caused higher prices and resource allocation being less efficient than it

usually is and thus there will be less jobs in numerous sectors. Overall there is no end-goal-

success using it.

References
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Ainsworth, R. T. (2016). Trump & VAT: NAFTA, Trade Barriers & Retaliatory Tariffs. SSRN

Electronic Journal. doi:10.2139/ssrn.2919058

Washington Slept Here: How Trump Caught Politicians Napping on Trade. (2019). Trade and

American Leadership,142-166. doi:10.1017/9781108606141.008