Background: US policies on free trade and protectionism

Discuss about the American Business and Public Policy.

The selected news article reports discuss international free trade and protection. The main theme of discussion in the reports is about the new strategies currently being employed by United States in relation to free trade and international trade. United States under the current administration of President Donald Trump has come with a way to restrict free trade relationships with other nations. United States of America has over the past had free trade relationship with world the world nations in some markets such as finance. Various countries like China, Israel as well as United Kingdom among other nations have been exchanging their goods and services with United States and other nations all over the world (Wu, 2018). However, United States of America is current putting restriction on free international trade. Donald Trump’s administration has in the past month employed the protectionist theory with tariffs already placed on Chinese goods and services in United States.  The current regime headed by president Trump claims that China has been exploiting the United States based on the free trade agreement. This administration therefore believes that retaliation is the most appropriate way to respond to the Chinese exploitation. The nation has paced trade tariffs on the Chinese products in order to protect their own.

Open trade is important for global economic growth, dispersal of commodities and the open economy as reported in the Economist newspaper. This situation is likely to change since the United States president has already placed his signatures on two proclamations showing his support to impose heavy taxes on metal product imports (Parkins, 2018).   Newspaper reports show the whole world being in a great shock by the United States decision to place tariffs on various commodities from China.  According to the New York Times report, United States decision to heavily tax Chinese goods and services as well as on metal products from the rest of the world apart from Canada and Mexico is will not only affect China but will interrupt international business (Myers, 2018). The CNBC also states in their report that, trade tariffs employed by the United States has shocked the global business. However, the authors of the report in their school of thought argue that such tariffs will have a positive effect on the global business in the long run.

 The report published by US news states that trade restriction which is currently being employed the United States is not healthy and may be hazardous to the global economy.  The report shows the high possibility of retaliation by Chinese as well as other nations of the world leading international trade wars (Kuo, 2018).  The CNBC news reports revealed that Chinese is getting ready for the United States and convinced that they would win the trade war by exploiting various US political and economic weaknesses. The trade war is likely to extend in the to other countries trading with China and United States. The content below in part B provides an in-depth analysis of the news reports about international trade theories and practices.

The impact of US trade policies on global trade

The content of the selected discusses various issues related to international trade theories. The authors of the reports discuss key international trade issues such free trade, trade protectionist, trade war, trade tariffs and the competitive advantages making both united states and China feel that each state can we the trade war.

International trade refers to the exchange of commodities among the world nations. International trade has been practiced between nations in the world leading to globalization and free trade. On the other hand, free trade is an international trade arrangement made between a friendly nation to promote open global economy and globalization.  Free trade comes as a result of the removal of various economic barriers enabling countries to trade freely with other as well as the free labor movement (Jackson & Sørensen, 2016). However, the content of the newspapers tend indicates that free trade is likely to have challenges as a result of trade tariffs which has been initiated by united states.  The idea behind free trade is linked to free movement of goods and services among world nations with an agreement. Free trade is meant to happen with favorable conditions or without trade barriers. Freer trade, on the other hand, can be affected by various factors such as trade tariffs employed by protectionists. The current United States administration has currently employed the use of tariffs on various items limiting trade.

Free trade agreements have got various positive effects of international business and globalization. To create an open economy, various nations must come together with favorable agreements. However, other nations are currently employing the protectionist theory mechanism such as tariffs to control the free trade of retaliation. The US under Donald Trump has placed trade tariffs on various goods from their trading partners (Myers, 2018). Tariffs are taxes imposed by a government of a given country on import commodities. The government can impose heavy taxes on imports for various reasons.  The United States has decided to impose heavy taxes on various Chinese products with the main aim to protect domestic employment in the country.  The issue relating to trade tariffs are always based on politics.

The current United States president believes that free relation between US and China has been abused by the Chinese and is the main cause of high unemployment rate in the nation.  This regime as revealed in the new reports has also taken tariff approach to reduce domestic employment competition and create jobs for the domestic US citizens. Adding costs on import goods such as aluminum and steel metals from outside the US is likely to increase domestic employment. Trade tariffs as a protectionists idea which works together with Mercantilists.

The potential for trade wars

Who gains from the US trade tariffs? Trade tariff policy is a country based policy which aimed at achieving trade balance and keep domestic employment. Trade tariffs increase the cost of import goods leading to many buyers going for the local or domestic product. Increased sales by domestic firms leading to expansion and employment availability (Kuo, 2018). Trade tariffs are also important as they discourage labor movement between the nations and safeguard domestic shoppers.  Tariff policy is one of the mechanisms employed by protectionists with an aim to protect the domestic interest of a nation from the competition. Even though domestic Americans may benefits, only the government cooperate owners will benefit more. Heavy taxes on steel and aluminum is a good opportunity for local investors but will be a challenge to US citizens using the two metals.   

Apart from protecting the domestic buyers as well as domestic employment. Countries can as well resolve into trade tariffs as a retaliation mechanism. Retaliation is a technique which a country is freely trading with another can impose if they think that the partner is not playing by the trade agreement. According to the current news reports, president of United States of America claims that China has been exploiting their trade agreement by dumping their products in US and immigration. He claimed that Chinese student currently studying in the United States composed 60% of the international student. The US president, therefore, believes that the only way to retaliate against Chinese is through trade tariffs (Promuk, 2018).).  However the tariff may result in domestic benefits for the United States, it has been a great shock and challenge to the global trade. Various countries have not politely taken the issues are soon planning to retaliate on the same. According to the news reports by south Chinese morning news and the Guardian, China is likely to compromise the United States of America as a form of retaliation leading to trade wars.  Apart from the Chinese products, United States has also imposed heavy taxes on steel and aluminum products from all over the world with an exemption of Mexico and Canada fueling the trade war.

Trade wars present a great challenge to the international business, the idea of open global economy, free trade globalization. A trade war is a condition currently being witnessed between the United States of America and the Chinese. Trade wars happen when two countries of more nations are raising creating trade tariffs and barriers on each other.  A trade war is increased through raise of taxes imposed on import goods. A trade war is an obstacle to international business when countries take extreme measures of protection as seen in the case of United States. The nation is currently using extreme measures for protection strategies as ways of retaliating the Chinese trade exploitation. The author of the selected newspaper reports agrees that some economic and protection mechanism is costly to trading counterparts triggering a trade war. 

The importance of free trade and globalization

The United States heavy taxes on metals and Chinese products has proved to be challenging to the global nation’s trading with the US. China has taken the first step launching a trade war against the United States where there are now raising taxes on US goods and services.  This was based on proper analysis is not likely to end with China and America raising taxes on each other but will extend to other nations trading with the two major business nations (Parkins, 2018). United States president assigned two proclamations confirming raise of taxes imposed on metals from all nations apart of Canada and Mexico. This action will result in various manufacturing companies in the word with the United States as the main market to suffer dearly thus retaliation. The international business is yet to experience great effect based on the current United States protection mechanism.

World reports show that China believes that they can win the trade war based on various competitive advantages. Competitive advantages are a various mechanism available for a given nation which enables the nation to remain the leading suppliers of a given product in an international business setting.  The Chinese government according to their president speech has more economic control compared to the United States.  The Chinese are planning to use economic control as a way of beating the United States in the war started by President Donald Trump.  China is planning to instruct various banks within the country to support factories to avoid job cuts which are likely to occur based on the American tariffs.

They also revealed that Chinese government is yet to target United States agricultural economy which is highly supported by the US Congress which is a good strategy. Imposing heavy taxes on agricultural products will compromise the US leaving the nation with no options but to reduce taxes on Chinese goods. Competitive advantages are good for perfectly organized international trade but not for countries in a trade war (Draper, 2017). Chinese president as revealed in the news reports believes that they can win the war with the united states of American based their competitive advantages. Based on the current trend in international business setting, the world trade organization should come up with important ways to resolve trade wars which is currently affecting globalization and open world economy.

Conclusion

Various theories of international theories apply to the news reports analyzed in the above discussion.  International business theories and practices are divided into two categories as firm based theories and nation based theories. I have acquired a great knowledge of international trade from the news content analysis (Ajami & Goddard, 2014). I have learned about effects of protectionist theory and its application by various nations. Protectionists such as the current United States president Donald Trump employ various strategies to preserve their countries interest. Various mechanisms employed mechanisms as witnessed from the news reports have both positive which are only enjoyed by investors but not consumers.  I have learned that even though trade tariffs are beneficial to countries like the USA, trade tariffs are pro-investors but has a great effect on consumers. 

I have also learned about the significance of international business theories.  By reading the five articles, I came to realize that free trade agreement is one of the best international trade organizations. Moreover, I have learned that as much as the protectionist theory may be beneficial to nations involved in international trade too much restrictions employed by protectionist administrators may interrupt international business organization. Reading the Economist analysis of the trade war between the Chinese and US enabled me to learn about trade wars and remedies which can be applied to maintain trade balance (Meyer & Peng, 2016). 

In addition to trade wars and relevant theories which can be used to solve trade struggles and conflicts, I have learned the importance of Porter’s theory of national competition. Countries involved in international trade should have competitive advantages to stay best in their line of production. In conclusion trades, theories and practices, as well as trade agreements, are significant for international trade and open economy.  To regulate international business flow, the world trade organization should apply various theories to solve the trade wars existing between China and the United States.

References

Ajami, R., & Goddard, J. G. (2014). International business: Theory and practice. Routledge.

Jackson, R., & Sørensen, G. (2016). Introduction to international relations: theories and approaches. Oxford university press.

Meyer, K., & Peng, M. W. (2016). International business. Cengage Learning.

Draper, T. (2017). American business and public policy: The politics of foreign trade. Routledge.

Promuk, J. (8:09 PM ET Thu, 1 March 2018). ‘The president is proposing a massive tax increase’: Conservatives tee off on Trump for tariff move. CNBC, 1-4. https://www.cnbc.com/2018/03/01/trump-steel-tariff-decision-roils-free-trade-.html

Parkins, D. (Mar 8th 2018). The rules-based system is in grave danger. The Conomist , 1-3. https://www.economist.com/news/leaders/21738362-donald-trumps-tariffs-steel-and-aluminium-would-be-just-start-rules-based-system

Kuo, L. (2nd April 2018). China retaliates against Trump tariffs with food imports;. The Guardian , 1-4. https://www.theguardian.com/business/global-economy+internationaltrade

Myers, S. (5th April 2018 ). ‘why china is confident it can beat Trump in a trade war.’. The New York Times , 1-4. https://www.nytimes.com/2018/04/05/world/asia/china-trade-war-trump-tariffs.html

Wu, W. (06 April, 2018, 2:37pm). Trade-offs or trade war? China ‘could be forced to compromise’ with the US. South China Morning Post , 1- : https://www.scmp.com/news/china/diplomacy-defence/article/2140479/trade-offs-or-trade-war-china-could-be-forced