Discuss whether implementing protectionist measures is the most effective way to deal with unemployment and income inequality in a country such as the U.S.
The North American Free Trade Agreement (NAFTA), established in 1994 to strengthen trade and investment ties between the United States, Canada, and Mexico, was initially celebrated as a key accomplishment under President Bill Clinton. However, over the years, many Americans came to view the agreement as a major factor behind the decline in U.S. manufacturing jobs. This sentiment was strongly echoed by former President Donald Trump, who repeatedly criticised NAFTA during his campaign and presidency, arguing that it disadvantaged American workers. His administration eventually renegotiated the deal, replacing it with the United States-Mexico-Canada Agreement (USMCA) in an effort to better protect U.S. industries and jobs.
b. Discuss whether implementing protectionist measures is the most effective way to deal with unemployment and income inequality in a country such as the U.S. [15]
Introduction
Protectionism refers to the use of trade barriers—such as tariffs, quotas, and subsidies—to restrict the inflow of foreign goods and services. These measures are often justified as ways to protect domestic industries and jobs from international competition. In the United States, the debate over protectionism intensified under former President Donald Trump, who imposed tariffs on goods such as steel, automobiles, and solar panels in a bid to reduce unemployment and income inequality. While these measures may offer short-term relief, the long-term effectiveness of protectionism as a tool for addressing these structural issues remains contested.
How Protectionism Can Address Unemployment and Income Inequality
One argument in favour of protectionism is that tariffs raise the price of imported goods, encouraging consumers to switch to relatively cheaper domestically-produced alternatives. This shift in demand supports local firms, allowing them to expand production and maintain or increase their workforce. For example, Trump’s 25% tariff on imported steel in 2018 aimed to protect U.S. steel producers from foreign competition, particularly from China. The goal was to revive domestic manufacturing and preserve jobs in declining sectors such as steel and automotive production.
This rationale also extends to the solar panel industry. Tariffs imposed on imported panels were designed to protect American solar manufacturers from low-cost Chinese imports. By shielding these firms, the U.S. government hoped to retain jobs and slow the offshoring of production.
Protectionism can also help shield lower-skilled workers whose jobs are most vulnerable to offshoring or foreign competition. In theory, by safeguarding “sunset” industries—such as traditional manufacturing—protectionist policies preserve wages for a segment of the labour force that would otherwise experience wage stagnation or job loss. This can moderate the rising wage disparity between high-skilled and low-skilled workers, potentially reducing income inequality.
Why Protectionism May Not Effectively Address These Problems
While tariffs may protect domestic industries, they often provoke retaliatory measures. In response to U.S. tariffs on steel and aluminium, major trading partners such as the EU and China imposed their own counter-tariffs on American goods ranging from motorcycles to agricultural products. These retaliatory actions reduce U.S. export competitiveness, lowering demand for domestically-produced export goods and negatively affecting employment in sectors reliant on international sales. The U.S. farming sector, for example, suffered significantly during the trade tensions with China, resulting in job losses and a spike in government subsidies to offset declining farm incomes.
Protectionism can also raise costs for industries that depend on imported inputs. For example, while the steel tariffs protected U.S. steelmakers, they simultaneously raised the cost of steel for American car manufacturers. This led to reduced competitiveness of U.S.-made vehicles in both domestic and global markets. As a result, companies like General Motors and Ford faced higher costs and reduced profitability, prompting layoffs and factory closures—ironically worsening unemployment in the very industries the tariffs were meant to protect.
Although protectionism may buy time for struggling industries, it often discourages innovation and efficiency. Shielded from competition, domestic firms may have less incentive to modernise or retrain workers. This results in a misallocation of resources—propping up declining sectors rather than investing in more competitive or technologically advanced industries. In the long term, this hinders productivity and may even prolong structural unemployment.
Evaluative Conclusion
To truly address unemployment and income inequality, governments must go beyond protectionism. Supply-side policies such as vocational training, investment in education, and support for technological innovation can better equip workers to adapt to structural changes in the economy. In the U.S., programs that retrain displaced manufacturing workers for jobs in the service or tech sectors offer a more sustainable path to reducing inequality.
Moreover, fiscal policies such as progressive taxation and targeted welfare transfers can redistribute income more effectively than blunt trade measures. Investments in regional development can also help revitalise areas most affected by deindustrialisation.
While protectionist measures can temporarily shield vulnerable industries and workers from global competition, they are not the most effective long-term solution to unemployment and income inequality. Retaliation from trade partners, rising input costs, and inefficiencies in resource allocation limit their effectiveness and can even worsen the very problems they aim to solve. For a country like the United States, a more holistic approach—one that combines short-term protections with long-term structural reforms—is necessary to build an inclusive and competitive economy in the global age.
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