Trade

Trade

The United States gives goods and services to other countries, and those countries give goods and services to it. That is what’s called trade.

In general, trade is the voluntary exchange of goods and services between different factors. Whether people exchange baseball cards or multimillion-dollar contracts, the exchanges must benefit both parties.

How does trade work in the United States? Who is benefitting the most when it comes to trade? What kind of trades are there? Which countries trade with the United States the most? What trade agreements has the United States entered? Those are the questions that’ll be answered in this article.

How Trade Works

Generally, trade is any voluntary exchange, like a trade of baseball cards or lunchtime snacks. Economically, trade deals with exports and imports connecting the global economy.

If something is sold to the global market, it’s an export. Exports can make well-connected economies a significant amount of money. If something is brought into a country from another country, it’s an import. Plenty of goods sold in American stores, like clothes and toys, can be considered imports.

There are two types of trade– domestic and international. Domestic trade is an exchange between two parties from the same country. A local farmer exchanging potatoes with a grocery store is considered domestic trade.

International trade is an exchange between two or more countries. Many products sold in the United States come from many different countries. That is international trade. When there aren’t any tariffs or other trade barriers, international trade becomes a free trade agreement.

Trade Agreements with the United States

The United States has 14 Free Trade Agreements (FTAs) with 20 countries, making it about 40% of its goods exports. The United State’s FTAs are with:

• Australia
• Bahrain
• Chile
• CAFTA-DR
• Colombia
• Israel
• Jordan
• Korea
• Morocco
• NAFTA
• Oman
• Panama
• Peru
• Singapore
• USMCA

The three FTAs in abbreviations deal with many countries and have an essential history behind them.

CAFTA-DR was agreed upon in 2006 between the United States and El Salvador, Guatemala, Honduras, and Nicaragua. One year later, the Dominican Republic joined the FTA, and Costa Rica soon followed in 2009. This FTA guarantees no tariffs on US consumer and industrial goods exports to CAFTA-DR countries, with almost all tariffs on American agricultural products being phased out by 2020.

NAFTA (North American Free Trade Agreement) was a trade agreement between the United States, Canada, and Mexico enacted in 1994. This agreement created a trade-free zone between the three countries and was considered the most crucial feature in the United States and Mexico’s bilateral commercial relationship.

When NAFTA expired on June 30, 2020, the United States, Canada, and Mexico updated it to the USMCA. This new agreement, enacted the next day, promises to benefit farmers, ranchers, and businesses and support high-paying jobs for Americans. This will create a more-balanced trading environment and grow the North American economy.

Pros and Cons of Trade

Trade is crucial for the global economy. It provides many benefits like–

• Lower prices
• Developed relationships
• Reduced inflation
• Better-paying jobs
• Competition

However, trade can also bring embargoes and tariffs, language barriers, cultural differences, and restrictions. That’s why countries must work together to fuel the global economy.

Sources:

https://www.investopedia.com/terms/t/trade.asp

https://www.trade.gov/us-free-trade-agreement-partner-countries

https://www.trade.gov/us-cafta-dr-free-trade-agreement

https://www.trade.gov/north-american-free-trade-agreement-nafta

https://www.trade.gov/usmca