What are trade wars?

EXPLAINERS: Concepts in 300 Words or Less


Trade barriers are commonplace around the world; virtually all countries protect at least some segments of their domestic markets.

What makes trade wars different?

Trade wars exhibit two traits. The first is the degree of trade protection. Trade wars don't break out over minor policy changes. Rather, they begin with significant escalations in protectionism.

Second, these increases are not one-off, isolated events. Trade wars occur when countries fall into a cycle of retaliation. One country raises barriers. Another responds. Rinse and repeat.

This is what we saw in the spring and summer of 2018.

Dating back to the start of 2018, President Trump announced significant tariff hikes on solar panels, washing machines, and then, more famously, steel and aluminum. These individual policies culminated in sweeping tariffs on hundreds of products totaling around $35 billion in Chinese imports.

Beijing responded in kind, raising tariffs against a variety of US exports, targeting America's agricultural sector in particular.

Since that initial exchange, US-China trade relations have deteriorated further with two additional waves of new tariffs. Total goods affected by the tariffs now total over $500 billion.

And that's just US-China trade. Billions more of America's trade with Canada, Mexico, and Europe is also affected.

It's no coincidence that economists bemoan the escalation in tensions. Countries do not sit idly by when hit with tariffs. They respond in kind. And this leaves all sides worse off.