Recent Updates #1

Hi and welcome to my blog! My name is Jessica Phillips and I am a senior Economics major at Duquesne University. In this blog, I will be discussing the latest updates in the economy happening during the time the post is being written. To help me do so, I will be utilizing both nightly news stories and sites like The Economist, USA Today, and more.

Recently, as most people are aware, a major issue in our country has been the increasing abortion bans. States such as Alabama, Ohio, and Georgia have already implemented laws restricting access to abortions, even for those who have suffered from incest or rape. It has become a much-debated topic and one that many people disagree with and feel as if the country is regressing. However, something that may often be overlooked is the impact these abortion bans have on the economy. According to The Economist in an article titled, “Increasing access to abortions may have reduced America’s crime rate”, it discusses the correlation between crime rates and abortions in America. To help further explain this, here is the graph the website posted:

This photo was based on a study done by Donahue & Levitt back in 2001, which argued that, “violent crime in states where abortion had been banned before 1973 was 15-25% rarer in 1997 than it would have been had abortion remained illegal”. Recently, the duo revisited the topic and found more evidence to back up the same conclusion. They found that crime fell much faster in states where more abortions were performed than it did in those where the procedure was performed less and overall, found that an increase in the abortion rate of 100 per 100,000 births leads to a 10-20% reduction in crime. This could be used as a reason for why abortions should remain legalized.

Another widely discussed topic in the country right now is president Donald Trump’s use of tariffs. Trump has imposed large tariffs on China and this has ultimately hurt relations between the United States and China. According to an article written in USA Today titled, “Here are 5 steps China could take to hurt the US beyond more tariffs”, it lists five ways in which China could hurt the American economy. The list is as follows: stop buying American products, slow down customs clearances, sell US treasury holdings, let currency slide against the dollar, and slow license and other approvals for US firms. Along with this, it has been reported by a survey done by the American Chamber of Commerce in China that since the tariff battle began, nearly half of US companies have experienced some type of retaliation doing business in China.

During my junior year of college, I took an intermediate macroeconomics course in which tariffs were studied in detail. Increasing tariffs falls under a Protectionist policy. Trade policies can take the form of protecting domestic industries from foreign competition, either by placing a tax on foreign imports (tariff) or restricting the amount of goods and services that can be imported (quota), which is protectionism. We learned that according to something called Lerner Symmetry, imposing tariffs has an overall negative effect on international trade because it  ultimately reduces exports as well. This is due to an appreciation of the real exchange rate. The increase in the price of domestic goods relative to foreign goods tends to lower net exports by stimulating imports and depressing exports. This reveals that appreciation offsets the increase in net exports that is directly attributable to the trade restriction. Therefore, it is never a good idea to raise tariffs drastically because in the end, it negatively impacts the trade balance and overall economy.

Sources:

“Increasing Access to Abortions May Have Reduced America's Crime Rate.” 2019. The Economist, The Economist Newspaper, www.economist.com/graphic-detail/2019/05/27/increasing-access-to-abortions-may-have-reduced-americas-crime-rate.

Zhang, Yan. “Here Are 5 Steps China Could Take to Hurt the US beyond More Tariffs.”. 2019. USA Today, Gannett Satellite Information Network, www.usatoday.com/story/money/2019/05/27/china-trade-war-what-else-could-chinese-do-hurt-us-without-tariffs/1220329001/.