What Happens When There Is a Surplus of Imports Brought Into the Us

Only available on StudyMode
  • Download(s): 1946
  • Published: July 14, 2013
Read full document
Text Preview
International Trade and Finance Speech
What happens when there is a surplus of imports into the U S: A surplus of imports is good for consumers but bad for local business. We have to produce and manufacture in order to export. As our export trade shrinks, so does our workforce and economy. The surplus of imported cars for 2012 has exceeded the exportation by $152 billion. Also the shelf life of cars is 1 year. Every year at the end of the cycle the existing models are sold off at huge discounts to make room for the new models, which is good for the consumer.

What are the effects of international trade to GDP, domestic markets and university students. International trade comprises exports and imports, the net result of which affects our GDP. Since our imports exceed our exports our GDP would be impacted by our net exports or deficits. The rippling effect of financing deficits is an increase in interest rates from selling bonds that reduces investments and growth. This further reduces GDP. Domestic markets flourish when there is a demand for local products overseas. If the domestic markets have to compete with imported products it could be a struggle. However jobs can be created for the advertising, sales, and distribution of foreign imports. The effect of international trade on university students has recently brought about an awareness of a vibrant industry in the education services. Of the $35billion worldwide market for international students, the U S was able to capture a market share of 45%, showing a healthy surplus of $12.6Billion in higher education. A foreign exchange rate is the rate at which one currency would be exchanged for another. It is essentially the value of a currency when compared to another and is determined by two fundamental forces of economics, supply and demand. When the supply of a currency exceeds the demand, the value of the currency falls. However when the demand for a currency exceeds the supply the value rises. When the value of a currency is low the exchange rate is low and vice versa. Exchange rates of currencies are influenced and determined as a result of a country’s income, changes in interest rates, price of goods and changes in trade policies. When income is high, imports are high and exchange rate is low. When interest rates are high there is a demand for U S currency to invest in U S assets and exchange rate is high. When the prices of local goods are high there is low demand for the local currency in favor of high demand for foreign goods and foreign currency. This results in a low exchange rate. Trade with a foreign country could be adversely affected by hiking trade restrictions like tariff. This increases the cost of imports and lowers the exchange rate. How do government choices in regards to tariffs and quotas affect international relations and trade

Tariffs and quotas are just two of the direct methods used in trade restrictions. There are also indirect methods of trade restrictions like protecting the health and safety of residents seen in the importation of consumables, time consuming inspections on general goods, special codes for packaging. Some of these restrictions are imposed for legitimate reasons but most of them are designed to protect the domestic producers from international competition. The most legitimate form of trade restrictions used are tariffs, which are taxes governments impose on internationally traded goods and quotas, which are quantity limits placed on goods imported. Trade is good for all countries because they all have comparative advantages they try to implement amicably with the use of tariffs and quotas. However these restrictions occasionally are used politically to influence relationships with foreign countries. Why doesn’t the U.S. simply restrict all goods coming in from China? Why can’t the U.S. just minimize the amount of imports coming in from other countries: The first reason why the U.S doesn’t restrict all goods coming in...
tracking img