Can tariff protect the U.S. economy?

According the concept of tariff, we understand that tariff is used to protect the domestic industries that are comparative disadvantage in the market competition with foreign companies. When the domestic products lost competitive in the market, there market share will be decreased and people in this industry will lose jobs. So the government may raise the tariff of import products to protect domestic industry. This method is common since the global trade exist. However, does tariff benefit the economy?

When the U.S. government added 35 percent of tariff to tires imported from china, the U.S. tire industry became competitive of price in temporary, because of the increased price of imported tires. However, all the people in U.S. have to pay more money to buy tires. The consumers were responsible for the increase of price. If more and more industries apply tariff to protect the jobs, the price level will be increased and people need more income to live, which caused a higher level of labor price. So in long term, the cost of U.S. tire industry will be increased.

The increase of tariff for import goods also caused the decrease of the export. When a country raises the import tariff, the other countries may also raise the tariff of products from your country to resist it. The decrease of the export also can affect the economy and job. Such as China raised the import chicken feet tariff when U.S. raised the tire tariff of china tires. As a result, two sides will be losing in this competition.  

Global specialization improve the efficient of the world, each countries specialized in the industry which they have comparative advantage to produce goods. When U.S. companies find that the labor costs is too high to afford, some of them consider to move the factories to low labor cost countries, such as China, India and Brazil, and then import the products to U.S. market. We cannot stop this trend, the best way we can do is to develop the technology and improve the productivity. The agreement between countries to lower the tariff to each other is benefit for countries and avoid the trade war.

  

Does the war on terror become trade barrier?

The “war on terror” looks like unrelated to global trade, but it really have a significant effect on global trade. This kind of effect has become barriers of trade. Since September 11^th, 2001, for the security reason, U.S. government increased the inspection on the ports and customs. The products imported from other countries need more time for security inspection, which caused the additional fee and more shipping time. The additional fee and shipping delay increased the cost of the products, which declined the comparative advantage of these imported goods. Especially from developing countries, the products from these countries have an advantage of labor price. The increased costs decreased the demand of these products.

The oil price has a direct effect on the shipping fee, which is an important factor in global trade. The “war on terror” caused the great need of energy. In the other side, some oil exporter countries get involved in the war, so the instability of these countries also caused the increase of the oil price. The increase of the oil price also becomes the barrier for the international trade.

For U.S., the “war on terror” cost a lot of money, which accelerated the country’s economy recession, and result of the decrease of consumption. A lot of daily goods in the U.S. are imported from other countries, so the decrease of consumption decreased the demand of import.

The “war on terror” is to protect the country, so the barrier it caused is not the fault of the government. To decrease the effect on the international trade, the government can make some policy to improve the efficiency of the inspection. Such as to develop the technology, which use internet system to get the whole information of the import products before they arrive the port. Also, if the import goods are important to the countries, U.S. can lower the tariff as subsidy of the increase cost.

Improve the Comparative Advantage of US Car Manufacturers

The market share of US car decreased  quickly when more and more foreign brands entering into US market. Some foreign car makers have the advantage of low labor cost because the employees have national health care system. US car makers have a high health care bill so that lose competitive in the market. Because of globalization, foreign brands enter into the US market and caused the US market more competitive. The cost is one of the most important factors in this competition. The lower cost of the labor in the foreign car manufacturers help their products become more competitive in the US market. The technology is another important factors in the auto industry. Many car manufacturers compete in the market by more safe car, low gas consumption, low pollution, and more electronic control.


If the US business afford a portion of health care benefit will increase the comparative advantage in the short term. Decrease the cost so the car manufacturers can devote more money into car development or lower the car price to compete with other companies. In long term, it can not solve the problem. US car makers not only have the high cost problem, but also have many other problems need to be solved. Such as gas efficiency, most US car have a relative low millage for gas compare to Japanese car. In the recent economy condition,  the increase of gas price and the decrease of job oppotunity cause the increase demand of economical cars. Compared to European car, the gas consumption are similar, but the quality and design are still lack. US car makers especially for the there big, developing by multiple brand, each brand need to devote a great mount of capital and resource, so the manufacturers can not concentrate on the development of technology.

There are some other policies can improve the comparative advantage of US car maker. First, Increase the import tariff of cars and lower the tariff of the car parts. Using this policy, the import car will have a high price and lose the competitive in the market. In addition, the lower tariff of car parts can attract the foreign car makers found manufacturers in United States, so they need to more employees which need to pay the same health care bill. In addition, this policy also benefit US car makers by importing car parts with low price to cut the costs. Second, government awards for car technology improvement could be set to encourage the innovation of US car technology, technology is another factor the make the car competitive in the market, people are willing to pay the same or high price to buy a high quality, more fuel efficient cars. In the recent economical environment, fuel efficient car is more popular because of the high gas price and economy depression caused lower income. The government also can invest on the technology development or provide a part of capital for car manufacturers to improve the car technology so that US car will become competitive in the future market. 

How open the openness are you

Openness play an important role in most of the countries. With the globalization, the interrelationship between countries are improved. Now we can see the products from different countries for choice in the market and domestic products are sold to other countries. For personal, I like  German cars and Japanese electronic products. The reason I like this products is because of its performance, which is better than some domestic products. Through the import, we can improve our life by choosing the products with best performance. For the countries,  Every countries have there own strengths of making products, if we focus on the products which we could produced with a lower cost than other countries, the products will be competitive in the foreign market and we can gain more profits by selling these products to the foreign market. In the other side, if we import the products we can make with a higher cost, the cost will be declined. Through import and export, we could save a lot of resources and increase the revenue through international market.

Openness also help the domestic companies to improve the productivity and keep competitive in the market. With the increase of the import products, the local brand face the high pressure of competing with international companies, that will force them to improve the technology and productivity. For example, when Apple's Iphone 4 entered into China market, it became popular phone in the market quickly. Some of the local brand develop very fast to maintain its market share. If Iphone 4 didn't import to Chinese market, the local brand would develop slower because they can keep the market share with less change of technology to decrease the cost. Some people think that more rely on the import will decrease the jobs for our country, which could decrease the people's income. I don't think that will be work out, although we may lost some jobs in the industries which is not efficient, we can increase the jobs in our competitive industries.

However, the number of openness is different for different countries. The number of GDP will affect this number. some country may have a high number of import and export, but they also have a high GDP number, the openness looks similar with others. In addition, the structure of the economy also affect the openness. For example,  manufacture account for a high percent of  China's economy, so the export products is much higher than other countries. Some of developed countries with a high percent of service industry, have a high amount of import.