Impacts of a Trade War on the Economy
There are two types of trade war effects on the economy: short-term and long-term.
Short Term Impact
Imposing trade barriers will typically succeed in short-term goal-oriented domestic business protection. But in a trade war, the opposing nation will impose its protectionist measures in retaliation. Frequently, the rules that are implemented help the domestic companies that are the targets of protection, but many other companies suffer because the foreign nation imposes restrictions on other commodities.
Long Term Impact
Most economists agree that trade wars damage economies over time, limit GDP growth, and generally reduce a nation’s ability to compete internationally. This is based on the theory of comparative advantage. Some of the increased charges that the government imposes on the importation of goods are transferred to the customer.
The domestic industries under protection aren’t producing at a lower cost than they were before the protectionist policy’s implementation, even if they are facing less competition. The product’s inefficiently high cost to customers causes consumption to decline, which in turn slows down the economy as a whole. Over time, this may result in a total decrease in the number of employments created.
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