No Bull Economics Lessons

In the long run, the gains from international trade are greater than the losses. In the short run, trade can hurt domestic producers and cause domestic unemployment, which can lead to the implementation of trade barriers by policy makers.

One type of trade barrier is a tariff; a protectionist tool that taxes imports. This raises the costs of foreign goods to keep domestic industries alive. However, higher prices hurt consumers.

Other tools of protectionist policy include import quotas (legal limits), complicated licensing procedures, and high quality standards.

A more unfortunate barrier to trade is a global military conflict that cuts off supply lines between trade partners; or perhaps, a war between two trading partners.

AP Macroeconomics Unit 6 International Trade