Why Would Donald Trump’s Policies Lead To A Slowdown In The World Economy?

Donald Trump is arguably the most unprecedented and controversial president in the history of the United States of America. A good economics tutor from an economics tuition centre in Singapore will tell you that his economic policies are likely to lead to a slowdown in the world economy. His immigration ban, protectionism and restrictions on outward foreign direct investment are especially worrying.

Immigration Ban

Donald Trump’s controversial immigration ban from seven Muslim-majority countries has sparked public outrage around the world. Although his administration has claimed that the objective of the immigration ban is to keep out terrorists, it is widely perceived to be a Muslim ban. Regardless of the real intention of the immigration ban, it will inevitably lead to huge economic costs to the United States apart from the huge social costs which we already see happening, and this will affect sectors across the United States ranging from the economics tuition industry to the automobile industry. The immigration ban will lead to a decrease in the supply of labour in the United States which will lead to a rise in wages. A rise in wages will lead to a rise in the cost of production in the economy which will lead to a decrease in aggregate supply resulting in a decrease in Gross Domestic Product. A decrease in Gross Domestic Product will lead to a fall in the demand for labour resulting in an increase in unemployment. This is particularly worrying as oil prices are rising due to the recent output cuts by OPEC. When firms reduce output, they will employ less factor inputs and therefore pay less factor income to households. A decrease in national income in the United States will lead to a decrease in consumption resulting in a fall in imports. When this happens, exports in the partners of the United States will fall which will lead to a slowdown in the economies. In view of the fact that the U.S. economy is the largest economy in the world, this is likely to lead to a slowdown, if not a recession, of the world economy. The adverse effects of a recession will be discussed in economics tuition.

Protectionism

Donald Trump has been threatening the trading partners of the United States with higher tariffs. For example, it has threatened to increase tariffs on cars imported from Japan. It has also threatened to increase tariffs on goods imported from Mexico to pay for the border wall. In economics tuition 101, we learnt that higher tariffs would cause consumers to suffer. An increase in tariffs will lead to a rise in the cost of production in the economy. When this happens, in order to maintain profitability, firms will increase prices at the same output levels which will lead to a rise in the general price level. Therefore, by threatening the trading partners of the United States with higher tariffs, Donald Trump is effectively threating American consumers with higher prices.

Outward Foreign Direct Investment

Donald Trump is discouraging outward foreign investment by threatening to impose high tariffs on imported goods produced by U.S. firms outside the United States. The purpose is to induce U.S. firms to invest in the domestic economy and therefore create jobs for domestic workers. The effects of an increase in investment expenditure on employment will be explained in greater detail in economics tuition. However, such as strategy is not without its disadvantages. As the cost of production in the U.S. is higher than that in many other economies, forcing some U.S firms to invest in the economy will increase their costs of production. When firms face a higher cost of production, they will increase prices in order to maintain profitability. When this happens, he prices of gods and services will rise which will cause consumers to be worse off.

If you need economics tuition from a good economics tutor in Singapore, you may contact Economics Cafe for more information. Economics Cafe is the best economics tuition centre with the best economics tutor you can find in Singapore.

Linda Geng

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