Final answer:
The EU created large markets and reduced production costs, leading to mixed economic effects on the U.S. Growth in the EU increases U.S. exports, but EU tariffs can impede them. Protective tariffs can support domestic industries initially but may discourage global competitiveness over time.
Step-by-step explanation:
The European Union (EU) created large markets and stimulated production, allowing industries to achieve lower costs. For nonmember nations like the United States, the economic effects of the EU are mixed. Economic growth in the EU means U.S. exports to the EU typically increase, benefiting U.S. industries. However, the EU's tariff barriers can also impede U.S. exports into the EU market.
Rising tariffs can protect emerging industries in a country, as seen historically with governments imposing tariffs to shelter domestic production from British competition. While this can aid in the development of new industries by encouraging local consumption of domestically produced goods, constant protection could hamper the incentive to innovate and remain competitive globally.
Over the years, the export/GDP ratio has climbed worldwide, reflecting increased globalization. Nevertheless, for vast economies like the U.S., this has a smaller impact due to their capability to sustain a sizeable portion of the division of labor domestically. In contrast, smaller economies must engage in international trade to take full advantage of the division of labor and economies of scale.