Good morning ladies and gentlemen!
Our today’s discussions will focus on the international trade and exchange rates by addressing effects of quotas, tariffs, and import surplus in the United States. As you all know, international trade is the act of exchanging capital products or services across international territories. To this end, international trade allows competitive pricing in the industry hence allowing greater competition among the countries involved. Foreign exchange rate or exchange rate is the value of a nation’s currency relative to that of another nation’s currency.
It is significant to note that if there is a surplus of imports in the United States; producers respond by producing more export products in order to maintain a trade balance (Reinert & Reinert, 2012). If the exports shrink then, the economy and workforce will also shrink. For instance, in 2012 there was a surplus of imported cars that exceeded the value of exported cars by $152 billion. This attracted losses for local car dealers because life cycle of vehicles is one year hence at the end of December 2012 all the cars were sold at huge discounts. As a result, consumers benefited a lot as could purchase cars at very low price. On the other hand, the U.S businesses sold surplus cars at a huge discount in an effort to create a room for new car models for the next cycle hence making losses (Metcalf, 2014).
Quotas and tariffs affect international trade and relations in the following ways. As you all know, quotas are very common trade barriers. Government may use quotas to set the nation’s limit on imports for some reasons. For instance, importing countries may want to protect domestic producers. Tariffs affect international trade and relations by decreasing the flow of goods from producers to the consumers after a tax is imposed on imports from foreign nations. As a result, tariffs provide an enormous amount of returns to the federal government. This plays a significant role in international trade and relation. It enables the government can control international trade by lowering or raising tariffs. For instance, following the 2002 surplus car imports in the United States, the federal government fixed a $1,000 duty to all the imported to hence discouraging more car imports (Siegmund, 2014).