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International Trade and Finance

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International Trade and Finance
International Trade and Finance
October 15, 2012

International Trade and Finance
Since the beginning of the current recession in 2008, the economy of the United States (U.S.) has been the spotlight of the media, government intervention, and the American public. In order to gain better understanding of the current health of the U.S. macroeconomy, one must review several areas of the economy including surplus of imports, effects of international trade, tariffs and quotas, and the restriction of imported goods from other countries such as China. As you will see, these areas are interconnected and changes in one cause larger changes in the other factors as well as the overall U.S. economy.
Recent attention regarding American trade overseas has been focused on the current imbalance in trade, specifically an import surplus with foreign nations. A recent example is found in the U.S. auto parts industry which directly or indirectly supports 1.6 million jobs [ (Scott & Wething, 2012) ]. These jobs come from the manufacture and distribution of auto parts and auto tires. Although in 2009 the U.S. government made a significant investment in the auto industry, the impact to the auto parts industry has been minimal. Of the 400,000 jobs directly lost, only about 60,000 have been regained. The main reason for the slow return of these opportunities for employment is the rise of Chinese goods in the industry. In the past 12 years, China’s export of auto parts has increased more than 900 percent while the U.S. trade deficit with China for auto parts has increased to $9.1 billion [ (Scott & Wething, 2012) ]. These foreign parts coming in to the country are keeping American companies from being able to open up more jobs and are directly affecting the unemployment rate of the nation. In addition, there is a direct negative impact to Gross Domestic Product (GDP) of the U.S. One would think the immediate response would be trade restrictions and tariffs to



References: Colander, David C. (2010). Macroeconomics (8th ed.). Boston, MA: McGraw-Hill/Irwin. Nelson, K. (2012). Exporting and Importing. Reference for Business, Para. 3. Radcliffe, B. (2011, June 8). The Basics of Tariffs and Trade Barriers. Retrieved from Investopedia: http://www.investopedia.com/articles/economics/08/tariff-trade-barrier-basics.asp#axzz29Ez5T0cj Scott, R. E., & Wething, H. (2012, January 31). Jobs in the U.S. auto parts industry are at risk due to subsidized and unfairly traded Chinese auto parts. Retrieved October 10, 2012, from Economic Policy Institute: http://www.epi.org/publication/bp336-us-china-auto-parts-industry The Economist (2012). The weak shall inherit the earth. The Economist Newspaper Limited. October 6-12, 2012. ISSN 0013-0613

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