Over the last two years, the US triggered various changes in international trade policies. Under President Trump's leadership, the country saw a change in a host of policies and policies that are seemingly beneficial to the US population. Consequently, the changes affected multinational corporations, including US-owned and foreign-owned companies. One of the policies' changes was US withdrawal from the USMCA, NAFTA, Transpacific Partnership, and KORUS (Garetto, Oldenski & Ramondo, 2019). The withdrawals from such key trade agreements changed the dynamics of trade between the member states in agreements. The changes had disastrous implications on multinational companies, which faced more taxes on the American market. For instance, in the case of KORUS, an agreement with South Korea, multinational companies operating in both the US and South Korea face more taxes with such implementations. Samsung, for example, faces increased tariffs in the American market, with importers having to pay more for its products. Consequently, such changes could lead to decreases in sales. In essence, the increasing cost of purchase could hinder most Americans from purchasing from the company. The US economic policy towards China also had a disastrous impact on multinational corporations. After the US imposed heavy tariffs on Chinese goods, the latter government countered the changes by imposing tariffs on American imports (Hass & Denmark, 2021). Multinationals were faced with increased pressures from both sides. For instance, an American multinational company operating in Beijing had to pay more tariffs for raw materials and other US requirements. Similarly, Americans importing goods from the company had to pay higher taxes. Consequently, decreased trade flows are experienced as the company faces more taxes in importing its raw materials, and its sales decrease due to high tariffs in its key markets.
According to economists, the changes in trade and tariffs policies in the US could be detrimental to its economic progression. The most significant changes in the policies involved the US trade relations with the world's leading manufacturer and exporter, China. The changes also led to the emergence of the US-Chinese economic war, which economists expect, to continue for a long time. In essence, the changes affected trade with other nations, whereby most multinationals diverted their trade flows from the US and Chinese markets (Garetto et al., 2019). For instance, after the 2020 economic trade policy changes, the US experienced slow economic growth, low employment rates, and decreased business investment. The freight transportation and manufacturing sectors experienced decreased operations due to decreased importations. In terms of employment, both countries included in the trade rift experienced a decrease in employment rates. For instance, more than 300,000 people lost their jobs in the US, contributing to 0.3% of the real GDP. By the end of 2020, the US had lost $316 billion due to the tariff and trade policies (Hass & Denmark, 2021). Finally, the US multinational corporations also lost more than $1.7 trillion in stock prices due to the tariff and trade policy changes.
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The changes in trade and tariff policies, especially the increase in tariffs on Chinese goods, affected my friend's business detrimentally. My friend operates a small-scale clothing franchise in Alabama, relying heavily on importing his stock from China. After the US-trade rifts resulting from the tariff and trade changes, he could no longer purchase his goods at the same price. The price of commodities increased by nearly 30%, making it difficult for him to gain as much profit as he got before the rifts (Hass & Denmark, 2021). In essence, he describes the changes as having increased his business operations' cost, thus leading to significant losses in his business. After the increases in the tariffs, my friend had to increase his commodities' price to gain significant profits. Consequently, his customers are adamant about adapting to the new prices as they view them as exaggerated. Unlike larger corporations that absorb the tariff costs in their commodity pricing, small businesses like my friends cannot absorb them. The only option such businesses have is passing the costs to their customers. This situation leads to imbalances in trade equality between the small-scale and large-scale business entities. Most customers have, since the changes, shifted their loyalties to larger businesses, which sell at the initial costs. For my friend and other small-scale business owners, the trade and tariff changes are detrimental to them, and they can only hope for the newly elected administration to reverse them.
References
Garetto, S. Oldenski, L. & Ramondo, N. (2019, October 8). Multinational enterprises in time and space: The effect of trade policy shocks. VOX EU. https://voxeu.org/article/effect-trade-policy-shocks-multinational-enterprise-activities
Hass, R. & Denmark, A. (2021). More pain than gain: How the US-China trade war hurt America. Brookings. https://www.brookings.edu/blog/order-from-chaos/2020/08/07/more-pain-than-gain-how-the-us-china-trade-war-hurt-america/
