In today’s global economy, consumers are accustomed to seeing products from all over the world in local supermarkets and retail stores. These foreign or imported goods provide consumers with more choices. Since the cost of imported products is usually lower than any local product, imports help consumers manage their limited domestic budgets.
If there are more goods imported from a country than it exports, goods exported from that country to foreign countries may disrupt the country’s trade balance and reduce the value of the currency. Since the value of a currency is one of the most important factors that determine a country’s economic performance and gross domestic product (GDP), a country’s currency depreciation will have a significant impact on the daily lives of a country’s citizens as well as to the trading partners. A good balance between imports and exports is very important to the country. A country’s imports and exports affect a country’s GDP, exchange rate, inflation and interest rates.
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How Imports and Exports Affect You
When a country imports goods, it means that the capital of that country has wiped off. Local companies are importers and pay foreign companies or exporters. Mass imports show strong domestic demand and strong economic growth. If these imports are primarily productive assets, such as machinery, in the long run productive assets are even cheaper for the country as they increase economic productivity.
A healthy economy is one where both exports and imports grow. This usually shows economic power and a viable trade surplus or deficit. If exports rise but imports fall sharply, it may indicate that the external economy is performing better than the internal economy. Conversely, a sharp decline in exports and an increase in imports may indicate that the domestic economy is doing better than the overseas markets.
For example, as the economy grows strongly, the US trade deficit tends to get worse. At this level, US imports exceed US exports. However, the long-term trade deficit of the United States does not prevent the United States from maintaining its position as one of the most productive economies in the world. However, increased imports and increased trade deficits may adversely affect national exchange rates. You can read more about the impacts of the imports and exports by following this link.
Trade war between the United States and China: what consequences?
Since January 2018, everyone knows a growing trade war between China and the United States, which cannot leave the global economy unscathed. What are the causes, consequences and issues? Are there any risks regarding the respective economic activities of these two countries, or even of the other nations?
Donald Trump signed the documents instituting taxes on imports and steel and aluminum in the United States. A decision which greatly worries China and Japan.
The main economic partners of the United States, China and Japan in the lead, strongly criticized the imposition by Donald Trump of taxes on steel and aluminum imports into the United States, pointing to the risks of a war business with unforeseeable consequences. China, the world’s second-largest economy, has expressed firm opposition to tariffs of 25% on steel imports and 10% on aluminum imports, with China’s Ministry of Commerce denouncing deliberate attack on the system multilateral trade.
In Japan, an important ally of the United States in Asia, government spokesman Yoshihide Suga warned him that this measure could threaten the entire world economy and that Tokyo would ask the United States not to apply the agreement. A little earlier, the Japanese Minister of Foreign Affairs, Taro Kano assured that his country would take the appropriate measures after having carefully studied the consequences on the Japanese economy.
How it affected the imports and exports of trading partners of USA?
The Trump administration has decided to break this logic and increase tariffs on Chinese imports, ignoring WTO rules and thus initiating a real trade war, leading to a series of Chinese reactions. Customs duties on trade in goods between the United States and China therefore fell from around 3% in 2017 to nearly 26% at the end of 2019. More generally, all the measures taken by the Trump administration have affected nearly $420 billion in US imports.
The effects of these measures as evaluated by several recent studies were as follows. First, it appears that Chinese exporters or USA importers passed on the tariff hike entirely to the selling prices, so USA importers and consumers suffered nearly $114 billion in losses. Then, American producers have benefited from these measures. However, the magnitude of these gains may vary depending on the reaction of American consumers, who are more willing to buy locally, the rise in production costs induced by the rise in imported inputs and the fall in exports.
Finally, the US government has seen its tax revenues increase by around $65 billion. In total, the US economy would therefore have lost $25 billion annually, or about 0.13% of GDP or 0.22% of US consumption.
Beyond this figure, which may seem low, we see that the increases in customs duties give rise to significant redistributive effects between types of economic agents (producers, consumers, government), and certainly at a more microeconomic, to redistributions between producers and between consumers, according to their exposure to tariff measures.
From the point of view of US trade deficits, the effects were almost negligible, the drop in imports from China being offset by the increase in imports from other countries (sometimes bordering on China, some producers having relocated their production to circumvent the increase in customs duties). From a monetary point of view, the increase in tariffs in the United States should in theory also lead to a relative appreciation of the dollar and a relative depreciation of the Chinese currency if the exchange rates are flexible. In doing so, the positive effects for the United States of such measures would be mitigated since an appreciation reduces the competitiveness of goods produced in the United States and strengthens that of Chinese products.
The future of the trade war is uncertain
The results showed that a feeling of uncertainty or pessimism prevailed about the future of the trade tensions, despite signs of progress in trade negotiations between the two countries. Among Chinese respondents, 42% believe the trade war could escalate, while 40% said they were not sure how it would develop. Over 60% of U.S. respondents said they believed the trade war was going to get worse or expressed uncertainty about its future.
Frequently asked questions
Why import and export is important?
Import and export is important for the growth of the economy of different countries. Countries do not have all the resources, goods or minerals and they have buy it from different country. Trading is the key to grow the economy of the countries.
Why a country should import?
There are certain benefits of importing things. One of the main benefits of importing is that a country can introduce new product to the market.
Why a country should export?
Many countries have certain resources in big amount that other countries are hardly able to find it. Selling those products may allow them to grow their economy.
