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ECOCB/535: The Digital Economy Block 1, class 3, comp 3 reflection Competency 3 - Reflection Assignment Content Once your faculty marks this activity as complete in the gradebook, the Competency Assessment will open for you to submit. Reflection This reflection activity is comprised of two sections collectively totaling a minimum of 500 words. Complete your reflections by responding to all prompts. Exchange Across International Borders The success of an economy in effectively employing the four factors of production determines how well that economy performs relative to its potential and relative to other economies. Address the following: Evaluate non-monetary benefits that open trade has contributed to the world since the end of World War II. Provide at least 2 examples of the above benefits and explain why you believe each is important. Analyze how changes to U.S. trade and tariff policies affected U.S. trade with other nations. Support your responses with recent (less than 2 years old) credible news sources.

Competency 3 - Reflection The end of World War II marked a significant turning point for international trade. At the conclusion of the war, a global shift occurred as the economy moved away from a protectionist market to allowing for open trade. In addition to the obvious monetary benefits of open trade, the shift to free trade has been accompanied by many non-monetary benefits as well. An important example of this can be seen in how open trade has encouraged a sense of peace and stability globally. History has shown that countries that participate in trade with each other are much more likely to “negotiate rather than make war.” (McConnell et al., 2021, p. 798). This is important because countries whose economies are mutually dependent are more motivated to resolve disagreements in a peaceful way as to avoid any detrimental fallout to their economies. Another example of non-monetary benefits of an open market is the cultural exchange brought about by international trade. Free trade has allowed a means for goods and ideas to be exchanged across international borders, which spreads countries’ diverse cultures across the globe. This cultural exchange is important because it has encouraged innovation as countries compete to be on the cutting edge of technology, science, and medicine. Changes to U.S. trades and tariff policies have a significant effect on the United States’ trade with other nations. There have been increasing tariffs in the U.S.-China trade war. In a report published on CNBC.com on August 31, 2023, China’s ambassador to the United States “blames the U.S. tariffs and export controls for a drop in trade between the two countries.” (Cheng, 2023). Changes to U.S. trade and tariff policies have also affected U.S. trade with Europe. CNN reports “In 2018, former US President Donald Trump slapped a 25% tax on imports of steel from

Europe and a 10% tax on its aluminum.” (Cooban, 2022). In response, Europe imposed tariffs on popular products made in the United States, including Levi jeans and Harley Davidson motorcycles. While the Biden administration has worked to reconcile the tensions caused by the changes made in 2018, relationships between the U.S. and Europe remain strained and will take considerable effort to repair. It is common for economists to have differences of opinions on the subject of U.S. trade balance. Many economists assert that trade deficits are not problematic and can even indicate a strong economy. Paul Krugman, Nobel laureate states that the trade deficit in the United States is caused by the nation’s position as a leader in the global economy. Krugman argues that “running a trade surplus isn’t a “win”; if anything, it means that you’re giving the world more than you get, receiving nothing but i.o.u.s in return.” (Krugman, 2022). Krugman is of the opinion that the role the U.S. dollar holds as the global reserve currency indicates that many countries depend on holding a significant amount of U.S. assets, causing the trade deficit due to the large dependency on U.S. financial assets, which is a positive thing. On the other hand, economist Peter Navarro disagrees and finds trade deficits to be a cause for concern as they increase the United States’ foreign debt and dependency. Navarro associates deficits with unemployment and a weak economy (McBride & Chatzky, 2019). Navarro asserts that consistent trade imbalances result in the U.S. relying heavily on foreign goods, hurting domestic production. When analyzing the perspectives of Krugman and Navarro, I find myself in favor of Krugman’s theories. I agree that a deficit in the U.S. trade economy reflects the nation’s economic attractiveness and the global dependency on U.S. assets. Yes, it is important that unemployment rates and industry competitiveness be addressed. However, I don’t view reacting to these challenges with tariffs

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