Why Countries Trade
Focusing on making the things you make best.
Specialization
Who can make MORE in the same amount of time has this kind of advantage.
Absolute advantage
A good a country BUYS from another country (comes in).
Import
A tax on imported goods.
Tariff
Striking back with your own tariffs.
Retaliation
What you give up when you choose one thing over another.
Opportunity cost
Who gives up LESS to make something has this kind of advantage.
Comparative advantage
A good a country SELLS to another country (goes out).
Export
A limit on how much of a good can be imported.
Quota
After a steel tariff, this group smiles while carmakers frown.
Steelworkers
Name the 3 main reasons countries produce different things.
Resources, climate, and skills
US: 10 cars or 5 computers. What is the US opportunity cost of 1 computer?
2 cars
The #1 and #2 U.S. goods trading partners in 2024.
Mexico and Canada
Government money paid to help a home business.
Subsidy
Free trade or protectionism: USMCA tax-free borders.
Free trade
Brazil grows lots of this crop; Saudi Arabia pumps lots of this.
Coffee; oil
Mexico: 4 cars or 4 computers. What is Mexico's opportunity cost of 1 computer?
1 car
USMCA replaced this older trade deal.
NAFTA
The CHIPS Act (2022) is an example of this tool.
Subsidy
Percent tariff the U.S. placed on many Canadian goods on Aug 22, 2026.
50%
This country is known for making computer chips.
Taiwan
In the example, what should each country make?
US makes cars; Mexico makes computers
The year USMCA took effect and its main goal.
2020; lower trade barriers
Import shirt $10, U.S. shirt $14. How big a tariff makes them cost the same?
$4
A tariff put on in response to another country's tariff, like Canada's on Sept 8, 2026.
Counter-tariff