Essay On The Trade Deficit

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The trade deficit in the 1980s had begun to steadily increase leading to the US government passing legislation to combat this shift. The US government passed laws that begun to increase the number of imports under trade restrictions. Increasing from 12% in 1980 to 23% in 1988. The policy on was a protectionist policy as consumers desire for foreign goods outweighed the foreign consumers desire for american goods. This is partially related to the increased growth of the us economy compared to the foreign markets. The us dollar had increased in value by 40% compared to leading trade partners between 1980 and 1985 thus leading to american exports becoming more expensive while foreign imports became cheaper. Thus leading to a greater deficit,…show more content…
The Canada Free Trade Agreement was implemented with the goal of eliminating all tariffs between the US and Canada. The Canada agreement also attempted to create conditions for fair competition within the free trade area, expand free trade and conditions for cross border investment, establish effective procedures for the joint administration of the agreement and the resolution of disputes, and finally lay the foundation for further cooperation and enhance the benefits of the agreement. The auto industry was hit hard in the 1980s as Japanese manufacturers were able to provide a cheaper good in comparison to us automakers. This being a result of the deficit that grew in the US causing most foreign good to be cheaper than domestic ones, as well as rising oil prices in the US leading to consumers taste changing to smaller cars. The spike in oil prices lead compact cars including both domestic and foreign makes , although foreign manufacturers were specialized in manufacturing, to gain 50% of the market share. In response to the market shift and to protect the domestic producers President Reagan implemented voluntary tariffs on japanese manufactures. The trade restrictions on imports did not alter the buying process of American consumers as foreign car sales were still greater than the big three automobile manufacturers in the states, those being GM, Ford, and
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