Skip to content

Global Trade: Problems and Potential Solutions

Global trade and investment have increased dramatically over the past 30 years.¹ On one hand, importing lower-cost goods from other countries has saved Americans money. On the other, it has cost American jobs.

How many jobs? About 6 million from the manufacturing sector alone between 1999 and 2011, according to the Bureau of Labor Statistics. However, while outsourced jobs to China explains 44 percent of the decline in U.S. jobs from 1990 to 2007, automation and more efficient processes have also played a role.²

Some experts claim innovation, automation, and new technology are responsible for up to 80 percent of manufacturing job losses over the past two decades.³ There are also economists who believe global trade is crucial to American prosperity and disagree with Donald Trump’s plans to implement tariffs or cut down trade with countries like China and Mexico.⁴

Thanks to the digital revolution, smaller companies have the capacity to compete on a global level, but comparatively few are doing so. It is estimated that fewer than 1 percent of the nearly 30 million U.S. companies registered to sell abroad actually engage in global sales.⁵ This means more U.S. firms have the potential to expand growth and productivity to global markets.

Digitization makes it easier for small startups to reach global customers; consider how eBay and Amazon got their start.⁶

Global expansion advocates say the U.S. government could play a role in connecting individual cities and smaller companies with foreign investors. It also could introduce more policies and funding to help job losses with reinvestment in affected communities.⁷

In one of his first acts as president, Trump signed an executive order to withdraw the U.S. from the 12-nation Trans-Pacific Partnership trade pact. This withdrawal gives China — not a participant in the TPP — the opportunity to forge leadership in Asian trade agreements. The president has indicated that he is interested in negotiating individual trade deals with TPP countries in order to procure better terms for the U.S.⁸

Some analysts believe the U.S. should renegotiate agreements to lower tariffs and other regulatory barriers to encourage various nations to specialize in certain exports in which they have operational expertise.⁹

Presently, the U.S. imports about $500 billion more than it exports.¹⁰ However, the U.S. remains the world’s largest economy and, despite the loss of manufacturing jobs to other countries, its share of global gross domestic product has remained relatively consistent over the past 36 years, ranging from 26 percent in 1980 to 25 percent in 2016.¹¹

Content prepared by Kara Stefan Communications

1 Gary Pinkus, James Manyika and Sree Ramaswamy. Harvard Business Review. Jan. 10, 2017. “We Can’t Undo Globalization, but We Can Improve It.” Accessed Feb. 12, 2017.

2 Mark Broad. BBC. Jan. 25, 2017. “Will Donald Trump mean the end of global trade?” Accessed Feb. 5, 2017.

3 Kirtika Suneja. Economic Times. Feb. 8, 2017. “WTO provides the means to deal with trade concerns: Roberto Azevedo.” Accessed Feb. 12, 2017.

4 Jason Margolis. PRI. July 21, 2016. “Trump’s trade policies are worrying economists.” Accessed March 9, 2017.

5 Gary Pinkus, James Manyika and Sree Ramaswamy. Harvard Business Review. Jan. 10, 2017. “We Can’t Undo Globalization, but We Can Improve It.” Accessed Feb. 12, 2017.

6 Ibid.

7 James Manyika, Gary Pinkus, Sree Ramaswamy, Scott Nyquist, Jonathan Woetzel and Arvind Sohoni. McKinsey Global Institute. November 2016. “Can the US economy return to dynamic and inclusive growth?” Accessed Feb. 12, 2017.

8 Fox News. Jan. 24, 2017. “What Trump’s trade and geopolitical moves mean for China.” Accessed Feb. 12, 2017.

9 Peter Morici. Fox News. April 25, 2016. “How to fix free trade.” Accessed Feb. 12, 2017.

10 Ibid.

11 Bob Davins. Fox Business. Nov. 9, 2016. “Trump Will Need to Leverage Power of U.S. Economy to Remake Global Trade.” Accessed Feb. 12, 2017.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.