What economic impact do protectionist policies have on global trade?

Protectionist policies, which involve measures such as tariffs, quotas, and subsidies aimed at shielding domestic industries from foreign competition, primarily function to reduce global trade efficiency. When countries impose these policies, they tend to distort the natural flow of trade by making imported goods more expensive or limiting the availability of foreign products.

This not only leads to inefficiencies in resource allocation but also encourages a decrease in competition, which can hinder innovation and limit choices for consumers. As a result, protectionism can lead to a scenario where the market is less efficient in distributing resources, as producers are less incentivized to improve and adapt to international standards.

Moreover, by raising barriers to trade, protectionist policies can create friction between countries, leading to retaliatory measures and a further reduction of trade flows. This cycle can diminish the overall benefits that can be derived from free trade, which often includes lower prices and increased variety for consumers. Hence, the impact of protectionist policies is a clear reduction in global trade efficiency.