Surpluses in products imported into an economy, especially an enormous economy such as the U.S, cause the prices of domestic products to fall drastically. Domestic producers and businesses dealing in domestic products suffer from reduced sales and low prices of the products. The surplus of imports, regardless of their origin leads to a drop in price, and some of the traders sell at losses. Because of the surpluses in imports, the country has a balance of trade deficit. The surplus of imports also affects the exchange rate of the dollar. This is because the importers must seek foreign currencies meaning they are selling the dollar for other currencies. The scarcity of the dollar in U.S raises its demand, which raises the value of the dollar. This rise in the value of the dollar results to reduced exports and increased imports, which aggravates the effects of the import surplus (Cohen, & Kenen, 2005). For instance, U.S has an import surplus in television sets. These sets are imported mainly from European and Asian countries. Because of this import surplus, domestic television makers in U.S face stiff competition from imports. These domestic sets have reduced revenues leading to decreased incomes for the resource owners especially in production. The domestic consumer enjoys favorable prices because the imports force the market prices for television sets to drop.
What Are the Effects of International Trade to GDP, Domestic Markets and University Students?
In the U.S, international trade has become an essential aspect of the GDP. This happens because the country depends immensely on imports, which means that the country imports more than it exports. Growing trade volumes in international spheres benefits the standards of the citizens of U.S. This international trading involves exporting and importing. Exporting leads to the creation of wealth in U.S because it facilitates production activities and the creation of jobs (Grath, 2012). However, importing leads to the formation of wealth abroad. Exporting adds to the GDP while importing subtracts from the GDP. Therefore, high volumes of exports and low imports facilitate the growth of the GDP; however, low exports and high imports contract the GDP.
International trade affects domestic markets because of the influx of goods into the markets. For instance, increased importations leads to decrease in sales of local products, low quality of products in the market and decreased revenues for domestic producers. In case of high importation volumes, consumers benefit from the low prices of goods in the market. The domestic market also suffers from the increased demands of the local currency. University students benefit from international trade (Grath, 2012). Increased exports provide job opportunities for students and helps in enhancing improved life, for the students. University students benefit from internationals trade because the education system can import equipments for learning, which improves educational standards.
How Do Government Choices In Regards To Tariffs And Quotas Affect International Relations And Trade?
Tariffs refer to taxes on importations and quotas refer to restrictions on importations. The federal government obtains enormous revenues from these tariffs. As a result, tariffs play a crucial role in international trade and relations. The government can control international trade by choosing to hike or lower the tariffs. Lowering the tariffs fosters trade, which facilitates cordial, international relations (Baker, 2003). However, hiking the tariffs restricts international trade by restricting importations. As a result, international relations become restrained because of the restrictions in international trade.
What Are Foreign Exchange Rates?
Foreign exchange rate refers to the rate of conversion of one currency to another currency. It occurs as the worth of one currency compared to another currency. The exchange market determines the exchange rates. The market is open to different ranges of sellers and buyers, where they trade currency continuously. Money dealers quote different selling and buying rates in retail exchange of currency (Baker, 2003). The rates can be determined by controlling the rates or leaving the market to decide the rates. In case of controlling the exchange rates, the government fixes the rates. The market determines the rates through the dynamics of demand and supply.
Why the U.S. simply does not restrict All Goods Coming In From China?
This is because China pegs the value of the Yuan to the dollar. This is aimed at keeping the prices of its exports to U.S cheap compared to U.S products, which strengthens Chinese exports to U.S. The U.S lacks the legal authority to restrict trade or goods from other countries under the laws in the WTO. The U.S does not have the authority and capabilities under the General Agreement on Trade and Tariffs rules to impose restrictions on imports from other countries (Baker, 2003).
Conclusion
Trade occurs as a crucial social and economic activity, which facilitates the development and the advancement of human life. Trade may result in trading surplus as witnessed in the import surplus in the U.S, where imports surpass exports. Because of these surpluses, domestic markets and producers are affected because of reduced sales. However, domestic customers benefit from the low prices. Governments have the capabilities to adjust tariffs and quotas, which affects international trade and relations. High tariffs and quotas limit international trade and hence relations. International trade depends on the foreign exchange, which governs the value of different currencies. International trade is also governed by international laws, which limits the capabilities of a country to limit, minimize or restrict international trade.
References
Baker, J. C. (2003). Financing international trade. Westport, CT: Praeger.
Cohen, B. J., & Kenen, P. B. (2005). International trade and finance: New frontiers for research : essays in honor of Peter B. Kenen. Cambridge [u.a.: Cambridge Univ. Press.
Grath, A. (2012). The handbook of international trade and finance. London: Kogan Page.
