What can be a potential risk for businesses engaging in international trade?

Engaging in international trade exposes businesses to foreign economies, which can present various risks. These risks include fluctuations in currency exchange rates, political instability, and economic downturns in the countries where they are operating. For instance, if a business relies heavily on a particular foreign market and that market experiences a recession, the company's sales and revenue could diminish significantly. Additionally, businesses may face challenges related to different regulations, tariffs, and trade policies that can impact profitability and operational efficiency.

While increased access to new markets and opportunities for expansion are significant benefits of international trade, they come with the aforementioned risks tied to the dynamics of those foreign economies. Similarly, reduced competition is not a guaranteed outcome, as international trade often exposes businesses to a wider array of competitors. Thus, understanding the vulnerabilities associated with foreign economies is crucial for companies engaging in international trade.