Shattering the Myths About Us Trade Policy

Shattering the Myths about US Trade Policy

The article takes arguments of famous economist such as Samuelson and Krugman and presents opposing views, based on the results from an in-depth analysis of the trade data. Specifically, it contradicts the theory that trade with developing countries results in job loss, decreased wages, increase in income inequality and negative impacts on the US economy overall. I found this article to be very relevant in the current state of political and economic affairs, where trade agreements and negotiations have been in the forefront of discussions and a hot topic.

The Trump administration recently announced the increase in import tariff for steel and aluminum by 25% and 10% respectively , with the goal of making the metal industry strong domestically and bringing manufacturing jobs back to the country. While on the surface, it may seem like it will indeed increase manufacturing jobs in the US, going by the conclusion of the article the benefits will be modest at best. This is because, the true reason behind the decline in manufacturing employment is increase in productivity and shift of demand towards services from goods and not trade deficit. To that point, the supporting data that showed the declining trend for all industrialized countries, including the ones that are in trade surplus was very apt.

The argument that because of the specialization of products and processes, there is really no price competition of the US exports is also convincing. However, I was not fully convinced with the fact that if, there is competition for the same products then US may indeed lose out to the developing nations on price. This made me think of the class discussion about how India is catching up with US, and how the Asian countries strategize in terms of decades versus 3-5 years in case of US firms. According to the article, it hasn’t happened yet but, that doesn’t mean it won’t happen

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