Posted: November 16th, 2022

Protectionist Policies

Protectionist Policies
The United States and Mexico have been enjoying a good trade relationship since independence. However, with the next US general elections nearing and two presidential nominees, the Republican’s Donald Trump and the Democrats’ Hillary Clinton, proposing different economic policies, citizens of the two countries have become worried more especially of the effect of the Donald Trump’s proposal of building a wall on the border. Supposing that the protectionist policies, which have been strongly supported by the Republican’s presidential nominee, take effect, the Mexico and the United States’ economies are both likely to be severely crippled.
Since the signing of the North America Free-Trade Agreement (NAFTA) to date, the two nations have been able to help each other produce goods at a cheaper cost. The American-Mexican border between Tijuana and San Diego in California is the busiest with the Mexicans crossing the border to shop, work and visit friends whereas the Americans go to the beaches and for relatively cheaper dentistry services in the south, as argued by the Economist’s editors. The said movements across the border by citizens from the two countries imply that there is a lot of cash flow across the boundary thereby increasing the money supply to aid the bilateral trade. By extension, when the money supply is high, banks in both countries can create more money thereby increasing GDP of both countries. Also, the two nations have been able to help each other by producing only those goods that one has a comparative advantage over. Hence, the US will only produce those goods and services that they can provide at the minimum production cost possible, and the same will happen in Mexico. This kind of specialization has seen Mexico become the second largest export market for the US and also bringing along with it employment opportunities for citizens of both nations, leading to the economic growth in both countries. The US is currently able to get a market for her finished products in the country that enjoys a good balance of payment responsible for the continuous growth of her GDP.
The protectionists’ policies already proposed by the Republican presidential nominee are the worst perceived economic policies for the growth of trade between America and Mexico. According to the Economist, the candidate proposes to a levy a tax of 35% on Mexicans that, according to economists, would see the Mexican GDP drop by 5%. In another school of economic thoughts, this kind of tax would throw the two countries in a trade war consequently forcing the U.S into recession and loss of a minimum of 4.8 million American jobs by 2019. The anticipated deterioration of the trade ties, dropping GDP, the possibility of recession and loss of many American jobs are the primary reasons the Mexican officials was sarcastic about the building of the wall on the border of the two countries. A deeper understanding of the construction of the wall on the border has more implications on the economy than one can ever imagine at a glance.
Works Cited
The Economist. It’s not just the wall that appalls. What Trumponomics Means for the Border Region, 2016.Retrieved from http://www.economist.com/news/americas/21708666-its-not-just-wall-appals-what-trumponomics-means-border-region

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Tags: Protectionist Policies