If another nation imposed trade restrictions against the United States, would a similar response by the United States be appropriate? Would this situation with two sets of trade restrictions be beneficial to the production levels in both countries? Would this situation improve the average per capita levels of personal consumption in both countries? If the United States merely threatened to impose trade restrictions, how could this improve the situation?
When countries decide to impose trade restriction against any country, it ultimately leads to an economic downfall for both countries, because on country does not have the ability to trade with the other, making them unable to sell. This decreases trade, which, in turn, decreases revenue and economic prosperity. Many people wonder why a government would want to do this. One argument is that of the national defense theory.
There are many reasons why countries impose trade restrictions, in this case, weaponry for defense is extremely important to United States in any case there is an outbreak of war; therefore it is only fair for them to protect themselves instead of sharing these items with other countries. That way a domestic supply of defense materials would be available if an international crisis ever occurred, the country would then have the things needed to defend itself on hand and would not have to worry about trying to secure what it needed from other countries.
Basically, the national defense theory argues how it would not be wise for one country to be completely dependent on other ones for defensive material. It would make the country vulnerable. However, if the government implements trade restrictions that result in a domestic supply of defense weapons, then the trade restrictions make the nation independent and prepared for conflict. Another example would be the Middle East imposing trade restriction for oil and petroleum. The Middle East is extremely rich in natural resources, particularly in petroleum.
However, the Middle East is also undergoing a lot of political issues today that has already affected the economy in both Middle Eastern countries and the United States. Prices of oil goes up in the United States because of the decrease in supply of oil, and the economy in the Middle East drops because they have lost a least one of their consumer. When another nation impose trade restrictions against the United States, a similar response by the United States is appropriate, because it threatens the interests of both nations.
The economy in both countries would slip downwards, and they are required to look for other sources to increase their economy, or at least keep it at a steady state. This however, would not be beneficial because neither nations are maximizing their profit. This is also because the factor of production is not allocated properly. The amount of input compared to the capital is not balanced accordingly, making it difficult for both nations to maintain their economy.