How are Trade Wars Fought?
Trade barriers, which can take several forms, are used to fight trade wars. Even if there are several techniques to impose these restrictions, the end effect is usually the same. Some typical strategies used in trade wars include the following:
Tariffs
One of the most popular trade protectionist measures is tariffs. This means imposing taxes on imported goods. Tariffs increase the price of imported goods while generating income for the state. Tariffs are used as a protectionist measure with an assumption that domestic producers of the good being taxed will profit from less competition from imported goods. Toll wars or customs wars are other names for trade conflicts that specifically involve tariffs.
Import Quotas
A trade restriction known as an import quota limits the quantity of a certain good that can be imported. Quotas do not generate income for the government, in contrast to tariffs. Limits on a particular product lessen the competition that foreign producers present to domestic producers. The purpose of the quota is to protect these domestic producers.
Domestic Subsidies
The theory behind domestic subsidies is that the government can use them to allow domestic producers to cut the cost of items produced locally. This makes it easier for the domestic company to compete on price with outside markets. Reduced expenses for regional manufacturers lead to a decrease in imports and a rise in exports. When domestic subsidies are utilized in nations or sectors of the economy with high levels of exports.
Currency Devaluation
Another trade war strategy is to devalue the national currency with foreign currencies. Lower exchange rates increase the competitiveness of home exports abroad. Simultaneously, imports become less competitive in the home market and comparatively more expensive.
Embargos
An embargo is a severe measure that formally prohibits the exchange of a specific good with a nation. This can be used to restrict the good’s commercial activities or to completely prohibit imports and/or exports. Usually, the implementation of this policy is done so in protest.
Trade Wars
Trade Wars: A trade war is an international conflict involving protectionist measures between countries over goods and services. A trade war may start when a country applies import restrictions or increases import tariffs in opposition to another. For example, when then-President Donald Trump slapped several tariffs on Chinese imports, the U.S.-China trade war broke out in the middle of 2018. China increased tariffs on American goods in retaliation.
Trade wars can start when one country thinks another is not being fair in trade. Groups within a country, like trade unions or industry supporters, may push leaders to make products from other countries less appealing, leading to a trade war. Trade wars may be harmful to both countries’ industries and consumers. They may spread to impact other industries as well.
In this article, we will look into the meaning, history, impacts, list, examples, advantages, and disadvantages of Trade Wars in detail.
Table of Content
- What is a Trade War?
- History of Trade Wars
- List of Trade Wars
- How are Trade Wars Fought?
- Impacts of a Trade War on the Economy
- Examples of Trade Wars
- Impact of US-China Trade War on India
- Advantages of Trade Wars
- Disadvantages of Trade Wars