Effects of changes in globalisation on international trade

Globalisation and Trade Restrictions

What Is Globalisation? 🛒🌍

Think of globalisation as a giant supermarket where every country is a shopper. Each shopper brings unique items (goods, services, ideas) and exchanges them with others, making the market richer and more diverse.

How Trade Restrictions Fit In 🚢📉

Trade restrictions are like putting a price tag or a lock on certain items in the supermarket. They can be:

• Tariffs – a tax added to imported goods.
• Quotas – a limit on how many units can be imported.
• Export bans – a country stops exporting a particular product.
• Non‑tariff barriers – rules, standards, or licensing that make trade harder.

Effects of Increased Globalisation 📈

1. Lower Prices – more competition drives prices down. For example, smartphones from China are cheaper than local brands.
2. Greater Variety – students can buy a wide range of books and gadgets from around the world.
3. Specialisation – countries focus on what they do best. The UK may specialise in finance, while Vietnam specialises in textiles.
4. Economic Growth – more trade often leads to higher GDP. The formula is simple: GDP = C + I + G + (X - M), where X is exports and M is imports.

Effects of Trade Restrictions 📉

1. Higher Prices for Consumers – tariffs raise the cost of imported goods.
2. Reduced Variety – quotas limit the number of products available.
3. Retaliation – other countries may impose their own restrictions, leading to a trade war.
4. Inefficiency – resources may be used in less productive ways to avoid tariffs.
5. Impact on Employment – industries that rely on imports may shrink, affecting jobs.

Case Study: The US–China Trade War ⚖️

In 2018, the US imposed tariffs of up to 25% on $360 billion of Chinese goods. China responded with tariffs on $50 billion of US goods. The result:

• US farmers faced higher costs for machinery.
• Chinese consumers paid more for American cars.
• Both economies saw a slowdown in trade growth.

Key Takeaway: Balance Is Key ⚖️

While globalisation brings many benefits, trade restrictions can protect domestic industries but may also hurt consumers and lead to retaliation. Policymakers must balance these effects carefully.

Quick Review Quiz

1. What is a tariff? Answer: A tax on imported goods.
2. How can a quota affect a market? Answer: It limits the quantity of goods that can be imported.
3. Explain one benefit of globalisation. Answer: Lower prices due to competition.

Glossary of Key Terms