Answer to Question #318850 in Macroeconomics for Hlamie

Question

With the specific reference to the current Russian-Ukrainian war, Discuss both the positive and the negative impacts of international trading

Answer 1

The positive impacts of international trading include:

Better trade risk management through market diversification. Nations that export to Russia and Ukraine are less dependent on that single market thus reducing impact of risk of the downturn.

Benefitting from the foreign currency exchange: The dollar weakened slightly as U.S. President Joe Biden announced new sanctions against Russia, including banks. With the dollar down, some nations may be able to export more as foreign customers benefit from a favorable currency exchange rate.

The negative impacts of international trading include:

increased inflation due to political unrest - the Russian Ukrainian war has exacerbated inflation in global trade and distorted the efficient working of the global market. This has led to inflation-induced recessions and food shortages

Two particular industries are affected by the unrest, food and fuel. Both commodities are sensitive to the stability of the global economy and this has led to higher prices. Ukraine and Russia are global players in agri-food markets. This translates to hardship and hunger in developing nations.