U.S. and China Free Trade

Imports increase the domestic supply and lead to lower prices for consumers.  Exports reduce the domestic supply and push price upward.  The net effect of international trade is an expansion in total output and higher income levels for both trading partners (law of comparative advantages).

“The United States is suffering from an excess of imports.  Cheap foreign products are driving American firms out of business and leaving the U.S. economy in shambles.”  Evaluate this view.

Review absolute and comparative advantages.  Personal private property protection allows for greater entrepreneurial ventures, and thus an expanding economy and job growth; can import tariffs and quotas reduce the benefits of trade?  Review the mechanics of import tariffs and quotas and world price.