Question

Many people claim that American consumers should give priority to products that are “made in America”. What does economic theory have to say about this statement?

Answer 1

The made in the America implies that only products produced in the America must be consumed. It would help revive the manufacturing sector of USA. The demand for the American product will rise.

But the standard theory of international trade does not support the such activities. As these activities would cause the rise in the cost of production and domestic consumers would be penalized in the form of increased prices . The consumer surplus would be minimised.

Thus made in America can offer the benefits over the short run but over the long run all benefits will wither away and economy will face rising cost of production.

The free trade policies must be followed by the all countries to maximize the benefits of all.