A trade war is an economic conflict that involves states raising tariffs or other trade barriers against each other, often in response to the tariffs of a rival state. This type of trade conflict typically arises from extreme economic protectionism and can involve a “tit for tat” strategy where each side increases tariffs in response to the other’s action.
Many economists argue that trade wars are bad for the economy because they raise costs for consumers, causing prices to rise across the board. However, others believe that it is sometimes desirable to impose protective measures to safeguard domestic industries and jobs.
While imposing tariffs is not the only way to reduce trade, it is an important tool that can help limit the effects of other forms of protectionism such as import restrictions and non-tariff barriers. Tariffs, or duties, are a type of trade barrier that affects the price of imported goods by increasing the cost of materials. This can increase production costs and impact profit margins, especially when raw materials are in short supply.
US-China trade tensions have resulted in major impacts to businesses and economies around the world. For example, Chinese retaliation against the US is likely to cause a slowdown in global manufacturing as businesses prioritize domestic production and delay investments. It also forces companies to seek out alternative suppliers, resulting in increased shipping and logistics costs, as well as production delays. In addition, currency fluctuations can also occur as countries try to offset the increased cost of goods by devaluing their currencies. These effects can be especially severe for developing and transition economies.