What are the negative effects of conflict on international trade? A case study of the United States

Introduction

International trade involves the exchange of goods and services between different countries. In some cases, international trade may also include the exchange of capital (Low 2016, 95). International trade has a significant share in the gross domestic product of many countries. Once a country purchases a product or service in the international market, it is known as an import whereas the goods that it sells in the international market are known as exports.

Many products are sold in the international market with the most traded being crude oil, vehicles, mobile phone devices, automobile parts, medicines, petroleum oils and computer systems, parts, and accessories. Examples of services that are traded in the international market include transportation, banking, tourism, and consultation services (Amadeo 2018). International trade has been fluctuating every year, and in 2017 it grew by more than ten percent.

International trade has been of advantage to the countries participating in it. Countries have had the chance to sell off their surplus goods and services, and this earns the countries some foreign exchange that boosts their balance of trade. International trade also helps countries to acquire goods that are important, but they cannot produce them. This trade also creates jobs as companies produce more to export to other countries. International trade also helps in boosting the economic growth of a country as the foreign exchange earned is used to improve the country’s economy (Amadeo 2018).

Conflict can be explained as discord that exists in a group or between different groups, and it is caused by differences in certain actions or beliefs (D’Souza 2014). One group may view the actions or beliefs of the other group as wrong and unacceptable and this result in conflicts. The interests of different groups may vary, and this also causes conflicts. Countries involved in international trade sometimes are involved in conflicts, and this negatively affects the trade between the two countries.

U.S. Involvement in International Trade

The United States is involved in international trade, and it imports more than it exports and this means that the country operates a trade deficit. In 2017, the U.S. exports were valued at 2.3 trillion dollars whereas the imports were 2.9 trillion dollars (Amadeo 2018). Most of the country’s production gets consumed in the country, therefore, having low amount to export. The country’s economy is also supported largely by services which are hard to export, and this is another contributing factor to having low exports. The country imports computers, mobile phones, and other consumer goods.

The country was also a large importer of oil and petroleum products, but this has been reduced through shale oil production. President Trump has been trying to impose protectionist measures so that the imports can be reduced and this will result in a favorable balance of trade (Amadeo 2018). The United States has had conflicts with other countries, and this has negatively affected the trade between the United States and other countries.

These conflicts are brought about by differences in policies between the two countries. For example, there existed a conflict between Russia and the United States because they had different political opinions on the war in Syria. Such a conflict negatively affects trade. The various negative effects of conflicts in the international trade involvement of the United States are discussed below.

Reduced Exports

Conflicts interfere with international trade causing a reduction in exports.  Once countries conflict with one another, they do not agree, and this impedes their trading activities. This means that they cannot export goods to each other and sometimes to the friends of those countries and this means that it will affect the number of exports they are making to the outside world. Reduction of exports is detrimental to the economy.

This is because the industries that deal with exports start experiencing losses due to loss of market for their goods. Once they make losses, these industries are on the verge of closing down. These industries try to remain productive by cutting down their costs. One way these industries cut their costs is through laying off some of the workers. This means that people lose their job hence becoming unemployed. This increases the number of unemployed people in the country (Torrey 2018).

It also affects the standards of living of the families that depended on the individuals that were laid off. Reduction in exports also leads to a deficit in the balance in the balance of trade. It is important that the United States has as much market for its goods as possible so that all the goods it makes for exports can be sold. This is because of the many negative consequences of the reduction in exports to the country. However, conflicts with other countries make the market for its goods to reduce.

Recently, the United States has had conflicts with China, and this is affecting the exports that the United States sells to China. Due to the conflict between China and the United States, China is considering imposing twenty-five percent tariffs on all American products, and this will make the products more expensive hence the citizens in China will prefer goods from other countries. This means that the exports to China from the U.S. will reduce and the consequences will follow (Torrey 2018). This shows how conflicts are negatively affecting the trade between the two countries.

Introduction of Tariffs

Countries that are involved in international trade sometimes form agreements so that they can have a free trade area where goods can circulate without any tariffs being imposed. Some agreements are also formed on the basis that the tariffs to be lower than what the countries impose on other countries. This reduction in tariffs makes goods cheaper hence being preferred in the international market. Once two countries that had an agreement are involved in conflicts, sometimes the agreements are terminated, and this leads to the introduction of tariffs, or they are raised above the previous percentage.

This makes the goods more expensive hence not being preferred in the market. The introduction of tariffs has negative effects on both imports and exports. The United States has had trade agreements and bilateral agreements with various countries. Some of the agreements include the transatlantic trade and investment partnership and this involved counties in the European Union and the U.S. Another agreement is the North American Free Trade Agreement that involved Mexico, Canada, and the U.S. (Amadeo 2018). This agreement meant that goods and services would circulate in the three countries without any imposition of tariffs.

However, President Trump believes in controlled trade other than free trade, and this has caused conflicts between the two countries and the United States. This, therefore, led to an introduction of tariffs between these countries. This means that imports from these countries will become more expensive which will be a negative consequence to the citizens who will be required to pay more for the goods (Torrey 2018). Exports to these countries will have a tariff added on them making these goods less preferable for the citizens of these countries, and this means loss of market.

The U.S has had bilateral agreements with China on the levels of tariffs to be imposed on the goods that they trade with one another. The recent conflict between the two countries has seen an import tariff introduced on all goods from China. This has made goods from China more expensive. China has introduced a tariff on American products, and this has made the American products less preferable in the Chinese market (Torrey 2018).

Reduced Production and Importation of Essential Goods

Countries import goods that they cannot produce. The citizens import these goods since they need them in the daily activities of their lives. Once conflicts between two or more trading countries arise, the importation of goods from these countries becomes a problem. This, therefore, means that citizens might lack some products that they need. Conflicts between countries may also lead to decreased production which may affect international trade.

There have been several instances where conflicts between countries and the United States has constrained important imports and has reduced production of essential goods. There existed a conflict between U.S. and Russia. This conflict was caused by the different political views that the two countries had on Syria. The two countries had different political aspirants that they supported in the war occurring in Syria (Ianchovichina 2014).

The conflict even escalated when the U.S. warned their citizens from attending the world cup that Russia was hosting. The conflict between the two countries has negatively affected the two countries where the U.S. has imposed sanctions on Russia. This means that the imports that the country was getting from Russia will no longer be on the market and this is a huge problem for the citizens who made use of them (Ianchovichina 2014).

Another conflict existed between the U.S. and Iraq. These conflicts have escalated, and the idea of a war between the two countries can be detrimental to both of the economies and also regarding international trade. Iraq is a producer of oil and petroleum products. This means war in the country will lead to a reduction of oil and petroleum products in the international market (Gardner 2016).

A reduction in the supply of a product leads to the increase in prices of that product in the market. This means that the conflict between Iraq and the United States leads to increase in prices of oil and petroleum products in the market and this means importation of these products to the United States will be more expensive and this will worsen the balance of trade for the country (Gardner 2016).

Redirection of Funds

Conflicts sometimes escalate and become physical wars which affect the economies of the warring countries negatively. A lot of money is used by these countries during the war and also building back the infrastructure after the war. This means that funds from other sectors are directed to building back the economies other than being used in the production of goods and services. War affects countries and makes trade reduce and sometimes trade between the two countries become extinct. Conflicts have existed between North Korea and the U.S. until recently when President Trump and Kim Jong Un have agreed on a reduction of ammunition. In 2017, the conflicts between the two countries escalated, and a war between them was suspected. The U.S. ha to put measures to protect its citizens from any attack and this meant that a lot of capital had to be invested and this was redirected from other sectors such as export production sector (Tikhonova 2017).

The speculation of the war also caused global panic, and this affected international trade. Companies in the U.S. that are involved in international trade also experienced low trade activities such as Amazon, Netflix, and Apple. Conflicts between the U.S. and other countries that have led to war have cost the country a fortune. The wars between the country and Iraq and Afghanistan, saw it pay more than one hundred and seventy billion dollars for reconstruction of these countries (Tikhonova 2017). This is a huge amount of money that would be used in production in the country. This production would include exports or import substitutable goods which would help in the balance of trade.

Increase in Prices of Goods.

The prices of goods affect the purchasing power of the citizens. Once the prices of goods increase the purchasing power of the citizens goes down, and this means that they can acquire fewer goods than they did before with the same amount of money. This means that the living standards of the citizens worsen. Conflicts between the United States and other countries make the imports to the country more expensive.

This occurs due to the increases in prices by the countries, the introduction of tariffs, or reduced supply of the goods in the market. Increase in prices in a negative indirect effect on international trade in the United States. The citizens have had to pay more for the goods that are imported. If the conflict between China and the United States is to continue, the citizens are expected to also pay more due to the increase in tariffs on goods imported from China (Torrey 2018).

Conclusion

International trade has its benefits in every nation, and these benefits cannot be overlooked. International trade helps countries to acquire what they do not have and sell their surplus which earns these countries foreign exchange. International trade assists in job creation and in improving the economic growth of a country. Conflicts hinder international trade by having negative effects on this trade. Conflicts make a country to have reduced exports, and this affects the country’s balance of trade. Conflicts also make countries that were previously operating in a free trade area to have tariffs imposed on them. This makes the goods expensive hence being unpopular in the other country. When conflicts escalate, war breaks out, and this inhibits the production of goods. This leads to the low supply of these goods in the international market. Wars that are brought about by conflict make a country incur reconstruction expenses.

This money that is used in the reconstruction is taken from other sectors such as the processing and manufacturing sector that is involved in the production of goods and services that are used in international trade. Conflicts also indirectly affect prices where prices rise due to conflicts. This lowers the purchasing power of the citizens. With all these, it can be concluded that conflicts negatively affect international trade. It is therefore important that the United States avoids conflicts with other countries to ensure that these effects are not felt in the country.

Reference List

Amadeo Kimberly. 2018. International Trade, Its Pros, Cons, and Effect on the Economy. The Balance. Retrieved from: https://www.thebalance.com/international-trade-pros-cons-effect-on-economy-3305579

D’Souza Anna. 2014. Conflict and Trade: Implications for Agriculture and Food Security.

Gardner David. 2016. Three truths about the Iraq war and its consequences. Financial Times. Retrieved from: https://www.ft.com/content/1353c1d8-4298-11e6-b22f-79eb4891c97d

Ianchovichina Elena. 2014. The Economic Impact of the Syrian War and the Spread of ISIS: Who Loses & How Much? Retrieved from: http://blogs.worldbank.org/arabvoices/economic-impact-syrian-war-and-spread-isis-who-loses-how-much

Low, Patrick. “International trade and the environment.” UNISIA 30 (2016): 95-99.

Tikhonova Polina. 2017. US vs North Korea War: Consequences And Economic Impact Would Be Severe. Retrieved from: https://www.valuewalk.com/2017/08/us-vs-north-korea-war-consequences/

Torrey Zachary. 2018. Could the Trump administration’s moves against China spark a trade war? Retrieved from: https://thediplomat.com/2018/01/us-china-trade-tensions-worsen/ Do you need high quality Custom Essay Writing Services?