Fear of Protectionist United States of America?

On taking office, President Donald Trump moved to withdraw from the Trans-Pacific Partnership (TPP) trade pact. TPP was dead even before it started. So we are back to original position where the existing trade agreements among nations still hold. Until these are renegotiated in the future, there is no change with the existing trade agreements. We have to wait and see.

I learned in Economics that the world would be richer when there is free flow of goods, capital and people across country borders under the principle of comparative advantage. Goods are produced in a country that has lower (opportunity) cost than another country. For this principle to work, trade between nations must not be hindered by protectionist measures such as tariffs on goods import.

It appears that Donald Trump’s administration is going along the protectionist route. The other nations hurt by this would retaliate resulting in trade wars. This won’t be good for global trade. The World Trade Organization (WTO) would be busy with mediating trade disputes.

I see the governments of different countries would be busy with this disruption. If not managed well politically, global economies may go into recession in the worst-case scenario. However, we may not reach this stage if common sense prevails. Electorates of countries would not want to see a recession and the governments of the day know it. The current government put into power by electorates can be removed in the next election.

As an individual, we can do things to adjust. If things are expensive because of protectionist measures, buy less, buy alternatives or do without. It is in our power. If a country is antagonistic towards us, do not travel there for leisure. Choose another country that is friendly. The collective consumer power can be harnessed to make a statement to nations. When the pockets of individuals are hurt such as a recession, we would tackle it as a nation coming together. It takes a recession to emerge stronger and wiser. This has been the case in successive recessions in the past. Has no fear and live in the moment. This too will pass.

Copyright © 2017, limkimtong for Living Investment

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One Response to Fear of Protectionist United States of America?

  1. Kent Ng says:

    I agree.

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