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International trade is based on importing and exporting products and materials between
the United States and other companies. When the amount of products exported is surpassed by
the amount of products imported, the resulting difference is said to be a foreign trade deficit. An
example of this is the balance of trade between the United States and China. Since the late
1980’s, the United States and China have traded goods. In recent years, the United States has
exported close to $65 billion dollars in goods to China, while importing over $321 billion. The
resulting difference of almost $256 billion is the trade deficit between the two countries 9”U.S.-
China,” 2009).
Surplus Imports
An example of a surplus import is the iPad. While it was developed and engineered in the
United States, they are manufactured in China. Because of the increasing demand for the
product, China is importing more and more of them to the United States. In the beginning,
demand was hard to meet and the price was driven up. Once demand leveled off, the price of the
product began to taper off as well, but the product was still imported in large numbers, flooding
the market.
Effects of International Trade
International trade has an impact on everyone involved. The Gross Domestic Product or
GDP is based on either what is spent or what is earned by individuals and businesses. As
competition increases, international trade can benefit both buyers and sellers by increasing the
overall GDP. Domestic markets compete with global markets to ensure both affordable prices as
well as product availability. International trade also affects students of colleges and universities.
Education is a commodity that foreign students are willing to pay for. Students from foreign
countries pay high tuition fees to be able to study in the United States (“International,” 2010).
Tariffs and Quotas and Their Impact on International Trade
Tariffs and quotas are placed on imports to give products produced in the United States a
chance to compete with cheaper versions brought in from other countries. Quotas limit the
number of products a company can ship to the United States for resale. In cases like the iPad,
where China imports numbers that surpass their quota, the United States may decide to place a
tariff on items that exceed the quota (Gitman, and McDaniel, 2009).
By placing tariffs on imports helps to keep domestic markets from being flooded with
foreign products, allowing American made products to find a place on the shelves. The
competition between domestic and foreign products keeps trade in balance as long as the foreign
trade deficit remains low and manageable. Tariffs and quotas are used to control that deficit. The
United States government places tariffs and a quota on imports to protect the country’s economy
and standing in the market. When international trade is balanced, both sides benefit and the
economy in each country thrives. When it is out of balance, one country reaps the benefits while
the other country suffers. The value of money can decrease causing dips in the market and a poor
economy for the company who is on the wrong side of the scale.
Foreign Exchange Rates
A foreign exchange rate is the amount of money a country pays for a United States dollar
and vice versa. For example, in Japan, one United States dollar may be traded for the equivalent
of 95 yen. Currency trading, which continues 24 hours a day (only stopping on holidays and
weekends). The constant buying and selling of products on international markets helps to
establish foreign exchange rates. When trade is balanced and each side is uniformly benefiting
from existing trade agreements, foreign exchange rates are similar making for close to an even
trade. Foreign exchange markets determine the rate of exchange by comparing the value of one
country’s money to another within the market.
In cases where one country is importing more than they are exporting, it can drastically
affect the effectiveness of their currency and the overall stability of their financial markets.
Foreign trade deficits can lead to fluctuations in a country’s stock market and its effectiveness in
foreign markets as well. Retail exchange markets have to do mainly with the rate of exchange
between buyers and sellers. The effects of the retail exchange market also affect the consumer
exchange. Travelers who are planning trips abroad, must exchange their home currency for that
of the country they are going to be visiting. The amount of exchange for consumers is
determined by that of the retail market (Tucker, 2011).
Minimizing the Number of Imports Brought into the United States
Minimizing the number of imports a country is allowed to send to the United States
reduces the amount of competition in the market. Without competition, prices can sky rocket.
Demand increases while supply decreases. As in the case of the iPad, the demand for the product
is consistent and people remain willing to buy them. China continues to flood the market and
keep prices affordable. Instead of minimizing the number of iPads imported into the country,
quotas can be set and tariffs applied to the number of products that exceed the quota. This keeps
trade in place, competition strong and customers able to purchase the products they want.
International trade has several facets. The balance of trade on an international level sets
the economic future of both buyers and sellers. It also establishes the value of a country’s money
and its services. Maintaining the delicate balance between imports and exports helps to build the
foundation of the world’s different financial markets.

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