adminA trade war is an exchange of tariffs and other trade barriers between nations. It can also include restrictions on capital investment and other non-tariff measures. Trade wars can cause economic pain for all parties involved and have political implications, as well.
In the past, trade wars often resulted in a negotiated solution that ended the conflict. But today, the US and China are at an impasse over the US’s Section 232 steel and aluminum tariffs and China’s retaliatory response to them.
Many economists have evaluated the impact of trade war tariffs and found that they raise prices for Americans and reduce American economic output and employment. For exporters, the higher prices mean less income for their workers and owners of their companies. These lower incomes discourage work and investment, which ultimately reduces economic output.
The trade war over the steel and aluminum tariffs may end with a negotiated agreement between the United States and China in which the US lifts its tariffs on Chinese products and Beijing drops its retaliatory ones. However, this is not a certainty and other disputes between the two countries could continue to escalate.
It’s important to understand why people favor or oppose trade wars. Skilled workers, for example, generally prefer low tariffs because they benefit more from the long run, while unskilled workers gain little from a tariff increase and might even be hurt by it.
