If America stopped buying from over seas...?

Question

What would happen to the world economy? I hear of the trade deficite, and wonder what would happen to the countries we buy from if we stopped buying from them and manufactured the stuff here? BAM - We're smart enough to produce the crap we buy... so what would happen?

Answer 1

The above answers are all good.

I would like to address your claim that we are smart enough to produce it ourselves.

That is not true either literally or figuratively. In fact, what the others have pointed out is that we are smart enough to NOT produce it ourselves.

What the US is good at is innovation - inventing processes and goods that others want and will pay for because they *can't* make it themselves.

We buy the components from elsewhere, put it together, and then sell it back at inflated prices, capturing most of the value added for ourselves.

Compare our efficiency by measuring GDP per capita to the countries with the largest populations: China, India, Indonesia, etc.

I don't have exact numbers, but I am certain the US is far far ahead of the rest of the world.

Which is good - we have relatively small population compared to those places, plus Russia and EU who are our trading competition.

Plus we have internally an unfortunately large subpopulation does not even participate in the economy by virtue of lack of education. The rest of us carry this seemingly permanent underclass, and still our efficiency is off the chart.

Imagine if we could re-integrate that underclass back in - why would we want to make any low value stuff at all when we could buy it, re-package it, and sell it back to everyone else?

That is our economic comparative advantage and our destiny to reach or lose.

Answer 2

We used to make all the crap we by ,but the cheap labor overseas took all the manufacturing out of the US. The labor unions had a part in it as well. How long do you think we will be making automobiles in this country when we pay the United Auto Workers $25.00 an hour and the Chinese work for $2.00 an hour . We buy from them because they make everything now.

Answer 3

Within the U.S., demand for illegal workers will surge, as Mexican maquiladoras move to the U.S.

The most seriously affected economy will probably be Canada, which is the largest trade partner of the U.S. Mexico will be impacted in a similar fashion. China will reel initially, but will quickly recover as Chinese businesses re-orient their exports to their other large trading partner, Japan.

The most affected industry will probably be automotive, since it depends on parts and components manufactured in Big Three plants in Canada and Mexico.

There will be no bananas (they don't grow in the U.S.) and very little coffee (the only coffee grown in the U.S. comes from Hawaii, and there is not nearly enough of it for the entire country). Winter fruit will be much harder to come by (a lot of fruit sold in the U.S. in winters comes from the countries of Southern Hemisphere, from Australian oranges to Chilean apples).

And, of course, there will be an acute shortage of oil and everything made from it...

Answer 4

If the United States stopped buying from overseas then prices would instantly jump about 600%, since China manufactures cheaply. Some resources the United States does not even have, and, if we stop buying from China, then they withdraw all their investments from the US dollar, which would sink it down about 900%.

Answer 5

It also has to do with comparative advantage; if someone in another country can produce something cheaper, we can buy from them and benefit just the same. Likewise, we have comparative advantage in various industries that other countries do not. Free trade benefits everyone and raises welfare so there is no need for protectionism.