Trade policies are really important because they affect how countries buy and sell things with each other. These policies can be divided into two main types: protectionism and free trade.

Protectionism

• What It Means: Protectionist policies are rules designed to protect local businesses from competition from other countries.
• Examples:
  • Tariffs: These are extra taxes on goods coming from abroad. They make foreign products more expensive, which helps local products sell better. For example, when the U.S. put tariffs on steel coming from other countries, local steel companies saw more sales.
  • Quotas: These are limits on how much of a certain product can be brought into a country. This helps local businesses stay competitive.

Free Trade

• What It Means: Free trade allows countries to trade goods and services without many barriers, like taxes or limits. This encourages companies to compete and come up with new ideas.
• Examples:
  • Trade deals like NAFTA (now called USMCA) remove tariffs between member countries. This helps countries rely on each other and focus on what they do best.

How It Affects Countries

Trade policies can change how countries get along with each other:

• They can create alliances when countries agree on similar trade goals.
• They can also cause tensions if one country feels hurt by another's protective rules. A good example of this is the trade conflict between the U.S. and China, where new tariffs led to a back-and-forth that impacted businesses around the world.

In short, knowing about trade policies is very important for understanding international business because they affect how countries access each other's markets and compete globally.