A trade war occurs when countries attack each other’s exports with levies or taxes. This can result from a dispute over intellectual property rights, or it could be a response to other issues such as national security or the need to protect domestic jobs.
Historically, protectionist measures have had mixed effects. On the one hand, they can help local industries survive or grow, but they can also raise prices for consumers. This can lead to a recession and increase inflation, which can cause political backlash. In addition, the resulting tensions can damage relations between nations and create global economic uncertainty.
Limiting foreign imports with tariffs and quotas can protect domestic producers by raising the cost of foreign goods and encouraging consumption of locally made products. It can also reduce the need to rely on imported goods, which encourages domestic production and can boost employment. However, if these limitations escalate into a full-blown trade war, they can hurt both parties.
The US has imposed tariffs on billions of dollars worth of goods, and China has responded in kind with levies on American products from soybeans and pork to aeroplanes and steel pipes. These costs are ultimately passed on to consumers, which can affect everyone around the globe.