what is a trade war 
a trade war happens when one country retaliates against another by raising import tariffs or placing other restrictions on the other country s imports trade wars can commence if one country perceives that a competitor nation has unfair trading practices domestic trade unions or industry lobbyists can pressure politicians to make imported goods less attractive to consumers pushing international policy toward a trade war also trade wars are often a result of a misunderstanding of the widespread benefits of free trade understanding a trade wartrade wars are usually considered a side effect of protectionism protectionism refers to government actions and policies that restrict international trade a country will generally undertake protectionist actions to shield domestic businesses and jobs from foreign competition protectionism is also a method used to balance trade deficits a trade deficit occurs when a country s imports exceed the amounts of its exports a tariff is a tax or duty imposed on the goods imported into a nation in a global economy a trade war can become very damaging to the consumers and businesses of both nations and the contagion can grow to affect many aspects of both economies a trade war that begins in one sector can grow to affect other sectors likewise a trade war that begins between two countries can affect other countries not initially involved in the trade war as noted above this import tit for tat battle can result from a protectionist penchant a trade war is distinct from other actions taken to control imports and exports such as sanctions instead the trade war has detrimental effects on the trading relationship between two countries because its goals are related specifically to trade sanctions for example may also have philanthropic goals in addition to tariffs protectionist policies can be implemented by placing a cap on import quotas setting clear product standards or implementing government subsidies for processes to deter outsourcing history of trade warstrade wars are not an invention of modern society such battles have been going on for as long as nations have conducted trade with one another for example colonial powers fought with each other over the right to trade exclusively with overseas colonies in the 17th century the british empire has a long history of such trade battles an example can be seen in the opium wars of the 19th century with china the british had been sending india produced opium into china for years when the chinese emperor decreed it to be illegal attempts to settle the conflict failed and the emperor eventually sent troops to confiscate the drugs however the might of the british navy prevailed and china conceded additional entry of foreign trade into the nation in 1930 the united states enacted the smoot hawley tariff act raising tariffs to protect american farmers from european agricultural products 1 this act increased the already hefty import duties to almost 40 2 in response several nations retaliated against the united states by imposing their own higher tariffs and global trade declined worldwide as america entered the great depression aided greatly by disastrous trade policies president roosevelt began to pass several acts to reduce trade barriers including the reciprocal trade agreements act beginning in january 2018 former president trump imposed a series of tariffs on everything from steel and aluminum to solar panels and washing machines these duties impacted goods from the european union eu and canada as well as china and mexico canada retaliated by imposing a series of temporary duties on american steel and other products the eu also imposed tariffs on american agricultural imports and other products including harley davidson motorcycles 3by may 2019 tariffs on chinese imports impacted nearly 200 billion of imports 4 as with all trade wars china retaliated and imposed stiff duties on american imports a study by the international monetary fund imf shows that u s importers of goods have primarily shouldered the cost of the imposed tariffs on chinese goods these costs are eventually passed on to the american consumer in the form of higher prices which is the exact opposite of what the trade war is intended to accomplish 5although the united states and russia are not engaged in a trade war u s president joe biden announced sanctions against russia on feb 22 2022 in response to russia s military aggression against ukraine the sanctions include blocking two russian banks that finance the military market restrictions on russian sovereign debt and targeting individual russian elites 6advantages and disadvantages of a trade warthe advantages and disadvantages of trade wars in particular and protectionism in general are the subjects of fierce and ongoing debate proponents of protectionism argue that well crafted policies provide competitive advantages by blocking or discouraging imports protective policies throw more business toward the domestic producers which ultimately creates more american employment these policies also serve to overcome a trade deficit additionally proponents believe that painful tariffs and trade wars may also be the only effective way to deal with a nation that continues to behave unfairly or unethically in its trading policies protects domestic companies from unfair competitionincreases demand for domestic goodspromotes local job growthimproves trade deficitspunishes nation with unethical trade policiesincreases costs and induces inflationcauses marketplace shortages reduces choicediscourages tradeslows economic growthhurts diplomatic relations cultural exchangecritics argue that protectionism often hurts the people it is intended to protect long term by choking off markets and slowing economic growth and cultural exchange consumers may begin to have less choice in the marketplace they may even face shortages if there is no ready domestic substitute for the imported goods that tariffs have impacted or eliminated having to pay more for raw materials hurts manufacturers profit margins as a result trade wars can lead to price increases with manufactured goods in particular becoming more expensive sparking inflation in the local economy overall example of a trade warwhile running for president in 2016 president donald trump expressed his disdain for many current trade agreements promising to bring manufacturing jobs back to the united states from other nations where they had been outsourced such as china and india after his election he embarked on a protectionist campaign president trump also threatened to pull the united states out of the world trade organization wto an impartial international entity that regulates and arbitrates trade among the 164 countries that belong to it 7in early 2018 president trump stepped up his efforts particularly against china threatening a substantial fine over alleged intellectual property ip theft and significant tariffs the chinese retaliated with a 25 tax on over 100 u s products throughout 2018 the two nations continued to threaten each other releasing lists of proposed tariffs on various goods although china responded with tariffs of its own the american duties did have an impact on the chinese economy hurting manufacturers and causing a slowdown in december each nation agreed to halt imposing any new taxes the tariff war cease fire continued into 2019 in the spring china and the united states seemed on the verge of a trade agreement at the beginning of may chinese officials took a new hard line in negotiations refusing to make changes in their company subsidizing laws and insisting on the lifting of the current tariffs angered by this apparent backtracking the president doubled down announcing on may 5 2019 that he was going to increase tariffs as of may 10 from 10 to 25 on 200 billion worth of chinese imports 4 he may have felt emboldened by the fact that the u s trade deficit with china had fallen to its lowest level since 2014 china halted all imports of farm products by state owned firms in retaliation the asian nation s central bank also weakened the yuan above the seven per dollar reference rate for the first time in over a decade leading to concerns about a currency war perhaps realizing that this was mutually destructive the united states and china agreed to a trade deal that was signed on jan 15 2020 8 but the subsequent covid 19 pandemic threatened a further escalation of trade tensions between the two nations 