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Is Protectionism a Bad Economic Policy?
Increasing protectionism will further slow economic growth. It would cause more layoffs, not fewer.
Prices of materials (eg. steel and aluminum) that rise because of tariffs will increase production costs in other industries, making those, in turn, less competitive with foreign suppliers.
show that countries which embraced freer trade in the 1980’s-1990’s saw an acceleration in their economic growth rates while countries which did not move towards free trade saw economic stagnation.
Other countries typically respond to protectionist tariffs on imports with their own tariffs on to exports of the protectionist country, in order to discourage and punish protectionist behaviour. This increases the price of exports abroad. As a result, demand for exports falls and jobs are lost.
Even if they are effective in the long term, protectionist policies create major uncertainty in the economy.
shocks have significant effects on economic growth as investors and consumers grow more cautious in the spending and other economic behaviour.
The protection of tariffs, quotas or subsidies allows domestic companies to hire locally.