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Raw Queries and Responses

1. Shard Calculation

Query:

Response:

Calculated Shard: 148 (from laksa078)

2. Crawled Status Check

Query:

curl -X POST \
  'http://laksa148.int.ahrefs:8124/' \
  -H 'Content-Type: text/plain' \
  -H 'X-ClickHouse-Database: crawler3' \
  -H 'Authorization: Basic YXBpOg==' \
  -d 'SELECT getAhrefsURLFromUnparsed(src_unparsed) AS found_url, ifNull(toUnixTimestamp(download_stamp), 0) AS crawl_time, ifNull(toUnixTimestamp(props_url_first_seen), 0) AS first_indexed_time, download_http_code AS http_code, src_unparsed AS src_unparsed, src_root_hash AS src_root_hash, history_drop_reason AS history_drop_reason, meta_title AS meta_title, meta_descriptions AS meta_descriptions, attrs_boilerpipe_text AS attrs_boilerpipe_text, attrs_markdown AS attrs_markdown, attrs_readable_markdown AS attrs_readable_markdown, meta_canonical AS meta_canonical FROM crawler3.page_info_local FINAL PREWHERE (src_root_hash, src_unparsed) IN ((getAhrefsRootHashFromUnparsed(getAhrefsUnparsedNoserviceFromURL(\'https://www.investopedia.com/terms/t/trade-war.asp\')), getAhrefsUnparsedNoserviceFromURL(\'https://www.investopedia.com/terms/t/trade-war.asp\'))) FORMAT JSONEachRow'

Response:

{"found_url":"https:\/\/www.investopedia.com\/terms\/t\/trade-war.asp","crawl_time":1776519678,"first_indexed_time":1510499378,"http_code":200,"src_unparsed":"com,investopedia!www,\/terms\/t\/trade-war.asp s443","src_root_hash":"7273739457760125548","history_drop_reason":null,"meta_title":"Trade Wars Explained: History, Benefits, and U.S.-China Example","meta_descriptions":["Discover the dynamics of trade wars, including their historical context, advantages, disadvantages, and a detailed look at the U.S.-China trade conflict."],"attrs_boilerpipe_text":"Key Takeaways\nA trade war arises when countries impose tariffs and restrictions on each other's imports.\nTariffs are taxes on imports that increase the cost of foreign goods.\nTrade wars can lead to economic tensions and impact global trade dynamics.\nCountries may engage in trade wars to protect local industries from foreign competition.\nThe impact of trade wars extends to consumers, businesses, and international relations.\nGet personalized, AI-powered answers built on 27+ years of trusted expertise.\nWhat Is a Trade War?\nA trade war is an economic dispute between two countries. It can occur when one country retaliates against another's perceived unfair trading practices with restrictions, such as tariffs, on imports.\nDomestic trade unions or industry lobbyists can pressure politicians to make imported goods less attractive to consumers, pushing international policy toward a trade war.\nAlso, trade wars are often a result of a misunderstanding of the widespread benefits of\nfree trade\n.\nUnderstanding a Trade War\nTrade wars are usually considered a side effect of\nprotectionism\n. Protectionism refers to government actions and policies that restrict international trade.\nA country will generally undertake protectionist actions to shield domestic businesses and jobs from foreign competition. Protectionism is also a method used to balance\ntrade deficits\n.\nA trade deficit occurs when a country's imports exceed the amounts of its exports. A tariff is a tax or duty imposed on the goods imported into a nation.\nGrowth of Damaging Effects\nIn an era of global trade, a trade war can become very damaging to the consumers and businesses of both nations, and the contagion can grow to affect many aspects of both economies.\nA trade war that begins in one sector can grow to affect other sectors. Likewise, a trade war that\nbegins between two countries\ncan affect other countries not initially involved in the trade war.\nTrade War vs. Other Protectionist Actions\nA trade war is distinct from other actions taken to control imports and exports, such as sanctions. The trade war has detrimental effects on the trading relationship between two countries because its goals are related specifically to trade. Sanctions may have philanthropic goals.\nOther non-tariff protectionist policies can be implemented by placing a cap on import quotas, setting clear product standards, or implementing government subsidies for processes to deter outsourcing.\nHistory of Trade Wars\nTrade wars are not an invention of modern society. Such battles have been going on for as long as nations have conducted trade with one another.\nFor example, colonial powers fought with each other over the right to trade exclusively with overseas colonies in the 17th century.\nBritish-China\nThe British Empire has a long history of such trade battles. One example is the opium wars of the 19th century with China.\nThe British had been sending India-produced opium into China for years when the Chinese emperor decreed it to be illegal. Attempts to settle the conflict failed, and the emperor eventually sent troops to confiscate the drugs.\nHowever, the might of the British navy prevailed, and China conceded to the entry of additional foreign trade into the nation.\nU.S.-Europe\nIn 1930, the United States enacted the\nSmoot-Hawley Tariff Act\n, raising tariffs to protect American farmers from European agricultural products.\n1\nThis act increased already hefty import duties to almost 40%. In response, several nations retaliated against the U.S. by imposing their own higher tariffs, and global trade declined worldwide.\nAs America entered the Great Depression, which was aided greatly by disastrous trade policies, President Roosevelt began to pass several acts to reduce trade barriers, including the Reciprocal Trade Agreements Act.\n2\nU.S.-China and Others\nBeginning in January 2018, President Trump imposed a series of tariffs on everything from steel and aluminum to solar panels and washing machines.\n3\nSome of the effects impacted goods from the\nEuropean Union (EU)\nand Canada, as well as China and Mexico. Canada retaliated by imposing a series of temporary duties on American steel and other products.\nThe EU also imposed tariffs on American agricultural imports and other products, including Harley Davidson motorcycles.\n4\nBy May 2019, tariffs on Chinese imports impacted nearly $200 billion of imports.\n5\nAs with all trade wars, China retaliated and imposed stiff duties on American imports.\nA study by the\nInternational Monetary Fund (IMF)\nfound that U.S. importers of goods primarily shouldered the cost of the\ntariffs on Chinese goods\n.\n6\nThese costs were eventually passed on to the American consumer in the form of higher prices, which was not what the trade war was intended to accomplish.\n6\nImportant\nAlthough the U.S. and Russia were not engaged in a trade war, President Joe Biden announced\nsanctions\nagainst Russia on Feb. 22, 2022, in response to Russia's military aggression against Ukraine. The sanctions included blocking the funds of two Russian banks that financed the military, market restrictions on Russian sovereign debt, and the targeting of individual Russian elites.\n7\nAdvantages and Disadvantages of a Trade War\nThe advantages and disadvantages of trade wars in particular, and protectionism in general, are the subject of fierce and ongoing debate.\nAdvantages\nProponents of protectionism argue that well-crafted policies provide\ncompetitive advantages\n. By blocking or discouraging imports, protective policies throw more business toward the domestic producers, which ultimately creates more American employment.\nThese policies can also serve to overcome a trade deficit. Additionally, proponents believe that painful tariffs and trade wars may be the only effective way to deal with a nation that continues unfair or unethical trading policies.\nDisadvantages\nCritics argue that protectionism often hurts the people it is intended to protect by choking off markets and slowing economic growth and cultural exchange.\nConsumers may begin to have less choice in the marketplace. They may even face shortages if there is no ready domestic substitute for the imported goods that tariffs have impacted or eliminated.\nHaving to pay more for raw materials hurts manufacturers' profit margins. As a result, trade wars can lead to price increases, with manufactured goods, in particular, becoming more expensive. This can then spark\ninflation\nin the local economy, overall.\nPros\nProtects domestic companies from unfair competition\nIncreases demand for domestic goods\nPromotes local job growth\nImproves trade deficits\nPunishes nation with unethical trade policies\nCons\nIncreases costs and induces inflation\nCauses marketplace shortages, reduces choice\nDiscourages trade\nSlows economic growth\nHurts diplomatic relations, cultural exchange\nNotable Trade War Example\nWhile running for President in 2016, Donald Trump expressed his disdain for many current trade agreements, promising to bring manufacturing jobs back to the U.S. from other nations where they had been outsourced, such as China and India.\n2018\nAfter his election, he embarked on a protectionist campaign. President Trump also threatened to pull the U.S. out of the World Trade Organization (WTO), an impartial, international entity that regulates and arbitrates trade among the over 160 countries that belong to it.\n8\n9\nIn early 2018, President Trump stepped up his efforts, particularly against China. He threatened a substantial fine over alleged intellectual property (IP) theft and significant tariffs. The Chinese retaliated with a 25% tax on over 100 U.S. products.\n10\nThroughout 2018, the two nations continued to threaten each other, releasing lists of proposed tariffs on various goods. Although China responded with tariffs of its own, the American duties did have an impact on the Chinese economy, hurting manufacturers and causing a slowdown.\n2019\nIn December, each nation agreed to halt the imposition of any new taxes. The tariff war cease-fire continued into 2019. In the spring, China and the U.S. seemed on the verge of a trade agreement.\nAt the beginning of May, Chinese officials took a new hard line in negotiations, refusing to make changes in their company-subsidizing laws and insisting on the lifting of the current tariffs.\nAngered by this apparent backtracking, the President doubled down, announcing on May 5, 2019, that he was going to increase tariffs, as of May 10, from 10% to 25% on $200 billion worth of Chinese imports.\n5\nHe may have felt emboldened by the fact that the U.S. trade deficit with China had fallen to its lowest level since 2014.\nChina halted all imports of farm products by state-owned firms in retaliation. The Asian nation's central bank also weakened the yuan above the seven per dollar reference rate for the first time in over a decade, leading to concerns about a\ncurrency war\n.\n2020\nPerhaps realizing that this was mutually destructive, the U.S. and China agreed to a trade deal that was signed on Jan. 15, 2020.\n11\n2024\nHowever, the U.S. continued raising trade barriers. In 2024, President Biden raised the tariffs on electric vehicles to 100%, with solar cells and semiconductors facing tariffs of 50%.\n12\nOther technology products also faced sharp tariff increases, causing China to pledge further retaliation.\n13\nIs the United States in a Trade War With China?\nYes. In 2024, the U.S. implemented extreme tariffs that some experts described as a trade war. President Biden raised the tariff on Chinese electric vehicles to 100%, and increased the tariff on lithium-ion batteries to 25%. The tax rates on solar cells and semiconductors increased to 50%. These tariffs were meant to protect domestic industries, at the cost of denying Americans access to cheaper Chinese technologies. As of early 2025, it was expected that President Trump might continue to impose and\/or raise tariffs, and not just on China, but on Mexico and Canada, as well.\n14\nHow Do Tariffs Affect the Economy?\nLike other trade policies, tariffs on trade have both winners and losers. Tariffs can generate billions of dollars of added revenue for a country. Domestic industries and manufacturers tend to benefit. Consumers and producers who use those products associated with tariffs have to pay higher prices, which can have an inflationary effect on the rest of the economy. As for retaliatory tariffs imposed by foreign countries on the U.S., they make exports more expensive to buyers in those countries but reduce U.S. GDP by a negligible amount.\n15\nAre Tariffs Good or Bad for the Economy?\nMost economists agree that tariffs are bad for the economy, since they prevent countries from reaping the benefits of economic\nspecialization\n. However, there may be additional benefits to protecting certain domestic industries, such as manufacturing or defense. While it may be cheaper for a country to source arms on the world market, there are also strategic advantages to maintaining domestic production capacity, even if such products are available at lower prices elsewhere.\nThe Bottom Line\nA trade war occurs when a government imposes punitive tariffs on another country, often in response to tariffs or protectionist trade policies raised by the other nation.\nTrade wars tend to be mutually damaging, as higher costs of trade ultimately are paid by consumers. However, advocates believe that trade wars can help protect local industries.","attrs_markdown":"\n\n[Skip to content](https:\/\/www.investopedia.com\/terms\/t\/trade-war.asp#main)\n\n[Investopedia](https:\/\/www.investopedia.com\/)\n\n[Trade](https:\/\/www.investopedia.com\/simulator\/?inv_to_sim=global_nav)\n\n- Please fill out this field.\n- [Newsletters](https:\/\/www.investopedia.com\/terms\/t\/trade-war.asp)\n\nPlease fill out this field.\n\n- [News](https:\/\/www.investopedia.com\/news-4427706)\n  News\n  \n  - [Markets](https:\/\/www.investopedia.com\/markets-news-4427704)\n  - [Companies](https:\/\/www.investopedia.com\/company-news-4427705)\n  - [Earnings](https:\/\/www.investopedia.com\/earnings-reports-5218419)\n  - [CD Rates](https:\/\/www.investopedia.com\/certificates-deposit-news-7111770)\n  - [Mortgage Rates](https:\/\/www.investopedia.com\/mortgage-rates-5184598)\n  - [Economy](https:\/\/www.investopedia.com\/economic-news-5218422)\n  - [Government](https:\/\/www.investopedia.com\/political-news-4689737)\n  - 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Kelly](https:\/\/www.investopedia.com\/robert-c-kelly-4799779)\n\n![Robert C. Kelly]()\n\n![Robert C. Kelly](https:\/\/www.investopedia.com\/thmb\/UG8EPP4nOD_hJeBX9pDBhUYUOhI=\/200x200\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/ScreenShot2020-03-23at2.04.43PM-8377f81c52324df1b62241b6fddc9d2d.png)\n\nReviewed by Robert C. Kelly\n\n[Full Bio](https:\/\/www.investopedia.com\/robert-c-kelly-4799779)\n\nRobert Kelly is managing director of XTS Energy LLC, and has more than three decades of experience as a business executive. He is a professor of economics and has raised more than \\$4.5 billion in investment capital.\n\nLearn about our  [Financial Review Board](https:\/\/www.investopedia.com\/investopedia-financial-review-board-5076269)\n\nFact checked by\n\n[Suzanne Kvilhaug](https:\/\/www.investopedia.com\/suzanne-kvilhaug-5197828)\n\n![Suzanne Kvilhaug]()\n\n![Suzanne Kvilhaug](https:\/\/www.investopedia.com\/thmb\/znbFHeELuyfkeore2XU_GHw2QaM=\/200x200\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/SuzannesHeadshot-3dcd99dc3f2e405e8bd37271894491ac.jpg)\n\nFact checked by Suzanne Kvilhaug\n\n[Full Bio](https:\/\/www.investopedia.com\/suzanne-kvilhaug-5197828)\n\nSuzanne is a content marketer, writer, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps develop content strategies.\n\nLearn about our  [editorial policies](https:\/\/www.investopedia.com\/legal-4768893#editorial-policy)\n\n![Trade Wars: When one country retaliates against another by raising import tariffs or placing other restrictions on imports.](https:\/\/www.investopedia.com\/thmb\/HXCJOEZb11AmMDIUTBjb2NSCybo=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/trade-war.asp-final-45307600c89942218c8dec8aa90367ee.png)\n\n![Trade Wars: When one country retaliates against another by raising import tariffs or placing other restrictions on imports.](https:\/\/www.investopedia.com\/thmb\/HXCJOEZb11AmMDIUTBjb2NSCybo=\/1500x0\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/trade-war.asp-final-45307600c89942218c8dec8aa90367ee.png)\n\nZoe Hansen \/ Investopedia\n\nClose\n\n### Key Takeaways\n- A trade war arises when countries impose tariffs and restrictions on each other's imports.\n- Tariffs are taxes on imports that increase the cost of foreign goods.\n- Trade wars can lead to economic tensions and impact global trade dynamics.\n- Countries may engage in trade wars to protect local industries from foreign competition.\n- The impact of trade wars extends to consumers, businesses, and international relations.\n\nGet personalized, AI-powered answers built on 27+ years of trusted expertise.\n\nASK\n## What Is a Trade War?\nA trade war is an economic dispute between two countries. It can occur when one country retaliates against another's perceived unfair trading practices with restrictions, such as tariffs, on imports.\n\nDomestic trade unions or industry lobbyists can pressure politicians to make imported goods less attractive to consumers, pushing international policy toward a trade war.\n\nAlso, trade wars are often a result of a misunderstanding of the widespread benefits of [free trade](https:\/\/www.investopedia.com\/terms\/f\/free-trade.asp).\n\n## Understanding a Trade War\nTrade wars are usually considered a side effect of [protectionism](https:\/\/www.investopedia.com\/terms\/p\/protectionism.asp). Protectionism refers to government actions and policies that restrict international trade.\n\nA country will generally undertake protectionist actions to shield domestic businesses and jobs from foreign competition. Protectionism is also a method used to balance [trade deficits](https:\/\/www.investopedia.com\/terms\/t\/trade_deficit.asp).\n\nA trade deficit occurs when a country's imports exceed the amounts of its exports. A tariff is a tax or duty imposed on the goods imported into a nation.\n\n### Growth of Damaging Effects\nIn an era of global trade, a trade war can become very damaging to the consumers and businesses of both nations, and the contagion can grow to affect many aspects of both economies.\n\nA trade war that begins in one sector can grow to affect other sectors. Likewise, a trade war that [begins between two countries](https:\/\/www.investopedia.com\/penguins-and-trumps-tariff-war-11711309) can affect other countries not initially involved in the trade war.\n\n### Trade War vs. Other Protectionist Actions\nA trade war is distinct from other actions taken to control imports and exports, such as sanctions. The trade war has detrimental effects on the trading relationship between two countries because its goals are related specifically to trade. Sanctions may have philanthropic goals.\n\nOther non-tariff protectionist policies can be implemented by placing a cap on import quotas, setting clear product standards, or implementing government subsidies for processes to deter outsourcing.\n\n## History of Trade Wars\nTrade wars are not an invention of modern society. Such battles have been going on for as long as nations have conducted trade with one another.\n\nFor example, colonial powers fought with each other over the right to trade exclusively with overseas colonies in the 17th century.\n\n### British-China\nThe British Empire has a long history of such trade battles. One example is the opium wars of the 19th century with China.\n\nThe British had been sending India-produced opium into China for years when the Chinese emperor decreed it to be illegal. Attempts to settle the conflict failed, and the emperor eventually sent troops to confiscate the drugs.\n\nHowever, the might of the British navy prevailed, and China conceded to the entry of additional foreign trade into the nation.\n\n### U.S.-Europe\nIn 1930, the United States enacted the [Smoot-Hawley Tariff Act](https:\/\/www.investopedia.com\/terms\/s\/smoot-hawley-tariff-act.asp), raising tariffs to protect American farmers from European agricultural products.1\n\nThis act increased already hefty import duties to almost 40%. In response, several nations retaliated against the U.S. by imposing their own higher tariffs, and global trade declined worldwide.\n\nAs America entered the Great Depression, which was aided greatly by disastrous trade policies, President Roosevelt began to pass several acts to reduce trade barriers, including the Reciprocal Trade Agreements Act.2\n\n### U.S.-China and Others\nBeginning in January 2018, President Trump imposed a series of tariffs on everything from steel and aluminum to solar panels and washing machines.3\n\nSome of the effects impacted goods from the [European Union (EU)](https:\/\/www.investopedia.com\/terms\/e\/europeanunion.asp) and Canada, as well as China and Mexico. Canada retaliated by imposing a series of temporary duties on American steel and other products.\n\nThe EU also imposed tariffs on American agricultural imports and other products, including Harley Davidson motorcycles.4\n\nBy May 2019, tariffs on Chinese imports impacted nearly \\$200 billion of imports.5 As with all trade wars, China retaliated and imposed stiff duties on American imports.\n\nA study by the [International Monetary Fund (IMF)](https:\/\/www.investopedia.com\/terms\/i\/imf.asp) found that U.S. importers of goods primarily shouldered the cost of the [tariffs on Chinese goods](https:\/\/www.investopedia.com\/tariffs-on-chinese-goods-8773900).6\n\nThese costs were eventually passed on to the American consumer in the form of higher prices, which was not what the trade war was intended to accomplish.6\n\n### Important\nAlthough the U.S. and Russia were not engaged in a trade war, President Joe Biden announced [sanctions](https:\/\/www.investopedia.com\/articles\/economics\/10\/economic-sanctions.asp) against Russia on Feb. 22, 2022, in response to Russia's military aggression against Ukraine. The sanctions included blocking the funds of two Russian banks that financed the military, market restrictions on Russian sovereign debt, and the targeting of individual Russian elites.7\n## Advantages and Disadvantages of a Trade War\nThe advantages and disadvantages of trade wars in particular, and protectionism in general, are the subject of fierce and ongoing debate.\n\n### Advantages\nProponents of protectionism argue that well-crafted policies provide [competitive advantages](https:\/\/www.investopedia.com\/terms\/c\/competitive_advantage.asp). By blocking or discouraging imports, protective policies throw more business toward the domestic producers, which ultimately creates more American employment.\n\nThese policies can also serve to overcome a trade deficit. Additionally, proponents believe that painful tariffs and trade wars may be the only effective way to deal with a nation that continues unfair or unethical trading policies.\n\n### Disadvantages\nCritics argue that protectionism often hurts the people it is intended to protect by choking off markets and slowing economic growth and cultural exchange.\n\nConsumers may begin to have less choice in the marketplace. They may even face shortages if there is no ready domestic substitute for the imported goods that tariffs have impacted or eliminated.\n\nHaving to pay more for raw materials hurts manufacturers' profit margins. As a result, trade wars can lead to price increases, with manufactured goods, in particular, becoming more expensive. This can then spark [inflation](https:\/\/www.investopedia.com\/terms\/i\/inflation.asp) in the local economy, overall.\n\nPros\n\n- Protects domestic companies from unfair competition\n- Increases demand for domestic goods\n- Promotes local job growth\n- Improves trade deficits\n- Punishes nation with unethical trade policies\n\nCons\n\n- Increases costs and induces inflation\n- Causes marketplace shortages, reduces choice\n- Discourages trade\n- Slows economic growth\n- Hurts diplomatic relations, cultural exchange\n## Notable Trade War Example\nWhile running for President in 2016, Donald Trump expressed his disdain for many current trade agreements, promising to bring manufacturing jobs back to the U.S. from other nations where they had been outsourced, such as China and India.\n\n### 2018\nAfter his election, he embarked on a protectionist campaign. President Trump also threatened to pull the U.S. out of the World Trade Organization (WTO), an impartial, international entity that regulates and arbitrates trade among the over 160 countries that belong to it.89\n\nIn early 2018, President Trump stepped up his efforts, particularly against China. He threatened a substantial fine over alleged intellectual property (IP) theft and significant tariffs. The Chinese retaliated with a 25% tax on over 100 U.S. products.10\n\nThroughout 2018, the two nations continued to threaten each other, releasing lists of proposed tariffs on various goods. Although China responded with tariffs of its own, the American duties did have an impact on the Chinese economy, hurting manufacturers and causing a slowdown.\n\n### 2019\nIn December, each nation agreed to halt the imposition of any new taxes. The tariff war cease-fire continued into 2019. In the spring, China and the U.S. seemed on the verge of a trade agreement.\n\nAt the beginning of May, Chinese officials took a new hard line in negotiations, refusing to make changes in their company-subsidizing laws and insisting on the lifting of the current tariffs.\n\nAngered by this apparent backtracking, the President doubled down, announcing on May 5, 2019, that he was going to increase tariffs, as of May 10, from 10% to 25% on \\$200 billion worth of Chinese imports.5\n\nHe may have felt emboldened by the fact that the U.S. trade deficit with China had fallen to its lowest level since 2014.\n\nChina halted all imports of farm products by state-owned firms in retaliation. The Asian nation's central bank also weakened the yuan above the seven per dollar reference rate for the first time in over a decade, leading to concerns about a [currency war](https:\/\/www.investopedia.com\/articles\/forex\/042015\/what-currency-war-how-does-it-work.asp).\n\n### 2020\nPerhaps realizing that this was mutually destructive, the U.S. and China agreed to a trade deal that was signed on Jan. 15, 2020.11\n\n### 2024\nHowever, the U.S. continued raising trade barriers. In 2024, President Biden raised the tariffs on electric vehicles to 100%, with solar cells and semiconductors facing tariffs of 50%.12\n\nOther technology products also faced sharp tariff increases, causing China to pledge further retaliation.13\n\n## Is the United States in a Trade War With China?\nYes. In 2024, the U.S. implemented extreme tariffs that some experts described as a trade war. President Biden raised the tariff on Chinese electric vehicles to 100%, and increased the tariff on lithium-ion batteries to 25%. The tax rates on solar cells and semiconductors increased to 50%. These tariffs were meant to protect domestic industries, at the cost of denying Americans access to cheaper Chinese technologies. As of early 2025, it was expected that President Trump might continue to impose and\/or raise tariffs, and not just on China, but on Mexico and Canada, as well.14\n\n## How Do Tariffs Affect the Economy?\nLike other trade policies, tariffs on trade have both winners and losers. Tariffs can generate billions of dollars of added revenue for a country. Domestic industries and manufacturers tend to benefit. Consumers and producers who use those products associated with tariffs have to pay higher prices, which can have an inflationary effect on the rest of the economy. As for retaliatory tariffs imposed by foreign countries on the U.S., they make exports more expensive to buyers in those countries but reduce U.S. GDP by a negligible amount.15\n\n## Are Tariffs Good or Bad for the Economy?\nMost economists agree that tariffs are bad for the economy, since they prevent countries from reaping the benefits of economic [specialization](https:\/\/www.investopedia.com\/terms\/s\/specialization.asp). However, there may be additional benefits to protecting certain domestic industries, such as manufacturing or defense. While it may be cheaper for a country to source arms on the world market, there are also strategic advantages to maintaining domestic production capacity, even if such products are available at lower prices elsewhere.\n## The Bottom Line\nA trade war occurs when a government imposes punitive tariffs on another country, often in response to tariffs or protectionist trade policies raised by the other nation.\n\nTrade wars tend to be mutually damaging, as higher costs of trade ultimately are paid by consumers. However, advocates believe that trade wars can help protect local industries.\n\nGet personalized, AI-powered answers built on 27+ years of trusted expertise.\n\n- [What is a currency war, an economic conflict?](https:\/\/www.investopedia.com\/terms\/t\/trade-war.asp)\n- [What is a balance of trade?](https:\/\/www.investopedia.com\/terms\/t\/trade-war.asp)\n- [Why do governments implement tariffs?](https:\/\/www.investopedia.com\/terms\/t\/trade-war.asp)\n\nASK\n\nArticle Sources\n\nInvestopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https:\/\/www.investopedia.com\/legal-4768893#EditorialPolicy)\n\n1. United States Senate. \"[The Senate Passes the Smoot-Hawley Tariff](https:\/\/www.senate.gov\/artandhistory\/history\/minute\/Senate_Passes_Smoot_Hawley_Tariff.htm).\"\n2. Office of the United States Trade Representative. \"[Eighty Years After the Reciprocal Trade Agreements Act](https:\/\/ustr.gov\/about-us\/policy-offices\/press-office\/blog\/2014\/June\/Eighty-years-of-the-Reciprocal-Trade-Agreements-Act).\"\n3. Office of the United States Trade Representative. \"[Trump Administration Sends Annual Trade Agenda Report to Congress](https:\/\/ustr.gov\/about-us\/policy-offices\/press-office\/press-releases\/2018\/february\/trump-administration-sends-annual).\"\n4. Harley Davidson Inc. \"[Harley-Davidson, Inc. To Vigorously Defend Its Position Following Aggressive EU Tariff Ruling](https:\/\/investor.harley-davidson.com\/news\/news-details\/2021\/Harley-Davidson-Inc.-To-Vigorously-Defend-Its-Position-Following-Aggressive-EU-Tariff-Ruling\/default.aspx).\"\n5. Tax Foundation. \"[Tracking the Economic Impact of U.S. Tariffs and Retaliatory Actions](https:\/\/taxfoundation.org\/tariffs-trump-trade-war).\"\n6. International Monetary Fund. \"[The Impact of US-China Trade Tensions](https:\/\/blogs.imf.org\/2019\/05\/23\/the-impact-of-us-china-trade-tensions\/).\"\n7. The American Presidency Project. \"[Fact Sheet: United States Imposes First Tranche of Swift and Severe Costs on Russia](https:\/\/www.presidency.ucsb.edu\/documents\/fact-sheet-united-states-imposes-first-tranche-swift-and-severe-costs-russia).\"\n8. Roll Call. \"[Trump’s Threat to Leave the WTO Alarms Many, Even in Congress](https:\/\/rollcall.com\/2018\/08\/03\/trumps-threat-to-leave-the-wto-alarms-many-even-in-congress\/).\"\n9. World Trade Organization. \"[Members and Observers](https:\/\/www.wto.org\/english\/thewto_e\/whatis_e\/tif_e\/org6_e.htm).\"\n10. Reuters. \"[Exclusive: Trump Considers Big 'Fine' Over China Intellectual Property Theft](https:\/\/www.reuters.com\/article\/business\/exclusive-trump-considers-big-fine-over-china-intellectual-property-theft-idUSKBN1F62SQ\/).\"\n11. Office of the United States Trade Representative. \"[Rebalancing United States-China Trade](https:\/\/ustr.gov\/phase-one).\"\n12. The White House. \"[FACT SHEET: President Biden Takes Action to Protect American Workers and Businesses from China’s Unfair Trade Practices](https:\/\/www.whitehouse.gov\/briefing-room\/statements-releases\/2024\/05\/14\/fact-sheet-president-biden-takes-action-to-protect-american-workers-and-businesses-from-chinas-unfair-trade-practices\/#:~:text=In%20response%20to%20China's%20unfair,protect%20American%20workers%20and%20businesses.).\"\n13. CNN. \"[What Biden's Tariffs on Chinese Imports Might Mean for American Jobs, the Economy and Inflation](https:\/\/www.cnn.com\/2024\/05\/14\/economy\/inflation-new-china-tariffs-biden-example\/index.html).\"\n14. Reuters. \"[North America Braces for New Trump Tariffs as Saturday Deadline Nears](https:\/\/www.reuters.com\/world\/americas\/north-america-braces-new-trump-tariffs-saturday-deadline-nears-2025-01-31\/).\"\n15. Tax Foundation. \"[Trump Tariffs: Tracking the Economic Impact of the Trump Trade War](https:\/\/taxfoundation.org\/research\/all\/federal\/trump-tariffs-trade-war\/#:~:text=Retaliatory%20tariffs%20are%20imposed%20by,competitively%20priced%20in%20foreign%20markets.).\"\n\nRead more\n\n- [Economy](https:\/\/www.investopedia.com\/economy-4689801)\n- [Economics](https:\/\/www.investopedia.com\/economics-4689800)\n\nPartner Links\n\n## Related Articles\n[![Protectionism: Government policies that restrict international trade to help domestic industries.](https:\/\/www.investopedia.com\/thmb\/foraxlfg62aO3RHUeRuGL04CrOc=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/Protectionism-FINAL-112a474bf8d642cd8a9b497813e24933.png) ![Protectionism: Government policies that restrict international trade to help domestic industries.](https:\/\/www.investopedia.com\/thmb\/foraxlfg62aO3RHUeRuGL04CrOc=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/Protectionism-FINAL-112a474bf8d642cd8a9b497813e24933.png) Understanding Protectionism: Tools and Examples for Trade Policies](https:\/\/www.investopedia.com\/terms\/p\/protectionism.asp)\n\n[![Facade of the Plaza Hotel, New York, NY. 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china](https:\/\/www.investopedia.com\/thmb\/OWAdtcyPFMA9k-Vvn2aCCqKYKOo=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-1328832142-68a8d5c0975449529757970c3e92fc7a.jpg) ![Aerial perspective of a container port, shenzhen, china](https:\/\/www.investopedia.com\/thmb\/OWAdtcyPFMA9k-Vvn2aCCqKYKOo=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-1328832142-68a8d5c0975449529757970c3e92fc7a.jpg) What Are Tariffs and How Do They Affect You?](https:\/\/www.investopedia.com\/news\/what-are-tariffs-and-how-do-they-affect-you\/)\n\n[![Workers with shipping containers](https:\/\/www.investopedia.com\/thmb\/CuwvgKyBT3fGcV7sQxPCW_mVoh8=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-2168138647-c4998ab510514f81b9a6d3b04b0069f6.jpg) ![Workers with shipping containers](https:\/\/www.investopedia.com\/thmb\/CuwvgKyBT3fGcV7sQxPCW_mVoh8=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-2168138647-c4998ab510514f81b9a6d3b04b0069f6.jpg) Which Countries Have the Highest Tariffs?](https:\/\/www.investopedia.com\/ask\/answers\/040115\/which-countries-have-highest-tariffs.asp)\n\n[![Aerial view of a shipping port with numerous containers and cranes along the waterfront](https:\/\/www.investopedia.com\/thmb\/FlK_c5s3GdOJ0NkD9_CRul7sl84=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-1304027960-644b7e40c68847eb9eb65cf864f57218.jpg) ![Aerial view of a shipping port with numerous containers and cranes along the waterfront](https:\/\/www.investopedia.com\/thmb\/FlK_c5s3GdOJ0NkD9_CRul7sl84=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/GettyImages-1304027960-644b7e40c68847eb9eb65cf864f57218.jpg) The Basics of Tariffs and Trade Barriers](https:\/\/www.investopedia.com\/articles\/economics\/08\/tariff-trade-barrier-basics.asp)\n\n[![Pete Navarro](https:\/\/www.investopedia.com\/thmb\/qGVFH63OXCyfqi3A1Oq2Cyom7IU=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/peter-navarro_final-9ada941f8b514acab72c57a90aa6a3dd.png) ![Pete Navarro](https:\/\/www.investopedia.com\/thmb\/qGVFH63OXCyfqi3A1Oq2Cyom7IU=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/peter-navarro_final-9ada941f8b514acab72c57a90aa6a3dd.png) Peter Navarro: Economist and Former Trump Adviser](https:\/\/www.investopedia.com\/articles\/insights\/012717\/peter-navarro.asp)\n\n[![](https:\/\/www.investopedia.com\/thmb\/3cqRTZpTVR4zOS-OmQMW4_EFOQw=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/investing14-5bfc2b8f46e0fb00265beb22.jpg) ![](https:\/\/www.investopedia.com\/thmb\/3cqRTZpTVR4zOS-OmQMW4_EFOQw=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/investing14-5bfc2b8f46e0fb00265beb22.jpg) Understanding Global Recessions: Definitions, History, and Examples](https:\/\/www.investopedia.com\/terms\/g\/global-recession.asp)\n\n[![Arc Elasticity](https:\/\/www.investopedia.com\/thmb\/FX06eOKRFFd4RfMVqWDbU2e2ZBo=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/arc-elasticity.asp-final-0cd81d49db2f4a9db123b12c6f8d5a23.png) ![Arc Elasticity](https:\/\/www.investopedia.com\/thmb\/FX06eOKRFFd4RfMVqWDbU2e2ZBo=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/arc-elasticity.asp-final-0cd81d49db2f4a9db123b12c6f8d5a23.png) Arc Elasticity Explained: Definition, Formula, and Example](https:\/\/www.investopedia.com\/terms\/a\/arc-elasticity.asp)\n\n[![Monetary Base: The total amount of a currency in circulation or held in reserves.](https:\/\/www.investopedia.com\/thmb\/ukY4to_odYn_we-CvCWlN-zrHN8=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/Monetarybase_final-e058b463445843cc917af5a16659972c.png) ![Monetary Base: The total amount of a currency in circulation or held in reserves.](https:\/\/www.investopedia.com\/thmb\/ukY4to_odYn_we-CvCWlN-zrHN8=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/Monetarybase_final-e058b463445843cc917af5a16659972c.png) Monetary Base Explained: Definition, Components, and Examples](https:\/\/www.investopedia.com\/terms\/m\/monetarybase.asp)\n\n[![Wall Street street sign outside New York Stock Exchange](https:\/\/www.investopedia.com\/thmb\/n0Z0KwxqEs8rmbMy7eiAXk24X_c=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/shutterstock_253136563-5bfc2b98c9e77c00519aa7a8.jpg) ![Wall Street street sign outside New York Stock Exchange](https:\/\/www.investopedia.com\/thmb\/n0Z0KwxqEs8rmbMy7eiAXk24X_c=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/shutterstock_253136563-5bfc2b98c9e77c00519aa7a8.jpg) Understanding the Cost of Living Index in the U.S.](https:\/\/www.investopedia.com\/ask\/answers\/100214\/how-cost-living-index-calculated.asp)\n\n[![A group of sad employees carry cardboard boxes filled with their office belongings after being laid off due to economy stagnation. ](https:\/\/www.investopedia.com\/thmb\/HgOuOcg1VLHuatN0FonOZfMr3jI=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/StagnationDefinitionHowItWorksandExample-3fbda07a5885443d8ae63d626efa457a.jpg) ![A group of sad employees carry cardboard boxes filled with their office belongings after being laid off due to economy stagnation. ](https:\/\/www.investopedia.com\/thmb\/HgOuOcg1VLHuatN0FonOZfMr3jI=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/StagnationDefinitionHowItWorksandExample-3fbda07a5885443d8ae63d626efa457a.jpg) Understanding Blacklists: Their History, Types, and Real-World Examples](https:\/\/www.investopedia.com\/terms\/b\/blacklist.asp)\n\n[![Great Leap Forward](https:\/\/www.investopedia.com\/thmb\/1dQvo8qFvlTZyGhJbQn_sY_wLvM=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/great-leap-forward.asp-FINAL-1-1104798804ec468ba5275b30707535c9.png) ![Great Leap Forward](https:\/\/www.investopedia.com\/thmb\/1dQvo8qFvlTZyGhJbQn_sY_wLvM=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/great-leap-forward.asp-FINAL-1-1104798804ec468ba5275b30707535c9.png) Great Leap Forward: Goals, Failures, and Lasting Impact in China](https:\/\/www.investopedia.com\/terms\/g\/great-leap-forward.asp)\n\n[![The Law of Supply](https:\/\/www.investopedia.com\/thmb\/i-9NPkxfywuPiPorEyLJsCtI-AM=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/terms_l_lawofsupply_FINAL-63c8fbc006fb4bf4aeb50ea439991efa.jpg) ![The Law of Supply](https:\/\/www.investopedia.com\/thmb\/i-9NPkxfywuPiPorEyLJsCtI-AM=\/282x188\/filters:no_upscale\$\$:max_bytes\$150000\$:strip_icc\$\$\/terms_l_lawofsupply_FINAL-63c8fbc006fb4bf4aeb50ea439991efa.jpg) Understanding the Law of Supply: Curve, Types, and Examples Explained](https:\/\/www.investopedia.com\/terms\/l\/lawofsupply.asp)\n\n[Investopedia](https:\/\/www.investopedia.com\/)\n\n[Newsletter Sign Up](https:\/\/www.investopedia.com\/terms\/t\/trade-war.asp)\n\nFollow Us\n\n- [News](https:\/\/www.investopedia.com\/news-4427706)\n- [Investing](https:\/\/www.investopedia.com\/investing-4427685)\n- [Simulator](https:\/\/www.investopedia.com\/simulator\/?inv_to_sim=global_nav)\n- [Banking](https:\/\/www.investopedia.com\/banking-4427754)\n- [Personal 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[C](https:\/\/www.investopedia.com\/terms-beginning-with-c-4769353)\n- [D](https:\/\/www.investopedia.com\/terms-beginning-with-d-4769354)\n- [E](https:\/\/www.investopedia.com\/terms-beginning-with-e-4769355)\n- [F](https:\/\/www.investopedia.com\/terms-beginning-with-f-4769356)\n- [G](https:\/\/www.investopedia.com\/terms-beginning-with-g-4769357)\n- [H](https:\/\/www.investopedia.com\/terms-beginning-with-h-4769358)\n- [I](https:\/\/www.investopedia.com\/terms-beginning-with-i-4769359)\n- [J](https:\/\/www.investopedia.com\/terms-beginning-with-j-4769360)\n- [K](https:\/\/www.investopedia.com\/terms-beginning-with-k-4769361)\n- [L](https:\/\/www.investopedia.com\/terms-beginning-with-l-4769362)\n- [M](https:\/\/www.investopedia.com\/terms-beginning-with-m-4769363)\n- [N](https:\/\/www.investopedia.com\/terms-beginning-with-n-4769364)\n- [O](https:\/\/www.investopedia.com\/terms-beginning-with-o-4769365)\n- [P](https:\/\/www.investopedia.com\/terms-beginning-with-p-4769366)\n- [Q](https:\/\/www.investopedia.com\/terms-beginning-with-q-4769367)\n- [R](https:\/\/www.investopedia.com\/terms-beginning-with-r-4769368)\n- [S](https:\/\/www.investopedia.com\/terms-beginning-with-s-4769369)\n- [T](https:\/\/www.investopedia.com\/terms-beginning-with-t-4769370)\n- [U](https:\/\/www.investopedia.com\/terms-beginning-with-u-4769371)\n- [V](https:\/\/www.investopedia.com\/terms-beginning-with-v-4769372)\n- [W](https:\/\/www.investopedia.com\/terms-beginning-with-w-4769373)\n- [X](https:\/\/www.investopedia.com\/terms-beginning-with-x-4769374)\n- [Y](https:\/\/www.investopedia.com\/terms-beginning-with-y-4769375)\n- [Z](https:\/\/www.investopedia.com\/terms-beginning-with-z-4769376)\n\nInvestopedia is part of the [People Inc.](https:\/\/www.people.inc\/) publishing family.\n\nNewsletter Sign Up\n\nNewsletter Sign Up","attrs_readable_markdown":"### Key Takeaways\n- A trade war arises when countries impose tariffs and restrictions on each other's imports.\n- Tariffs are taxes on imports that increase the cost of foreign goods.\n- Trade wars can lead to economic tensions and impact global trade dynamics.\n- Countries may engage in trade wars to protect local industries from foreign competition.\n- The impact of trade wars extends to consumers, businesses, and international relations.\n\nGet personalized, AI-powered answers built on 27+ years of trusted expertise.\n## What Is a Trade War?\nA trade war is an economic dispute between two countries. It can occur when one country retaliates against another's perceived unfair trading practices with restrictions, such as tariffs, on imports.\n\nDomestic trade unions or industry lobbyists can pressure politicians to make imported goods less attractive to consumers, pushing international policy toward a trade war.\n\nAlso, trade wars are often a result of a misunderstanding of the widespread benefits of [free trade](https:\/\/www.investopedia.com\/terms\/f\/free-trade.asp).\n\n## Understanding a Trade War\nTrade wars are usually considered a side effect of [protectionism](https:\/\/www.investopedia.com\/terms\/p\/protectionism.asp). Protectionism refers to government actions and policies that restrict international trade.\n\nA country will generally undertake protectionist actions to shield domestic businesses and jobs from foreign competition. Protectionism is also a method used to balance [trade deficits](https:\/\/www.investopedia.com\/terms\/t\/trade_deficit.asp).\n\nA trade deficit occurs when a country's imports exceed the amounts of its exports. A tariff is a tax or duty imposed on the goods imported into a nation.\n\n### Growth of Damaging Effects\nIn an era of global trade, a trade war can become very damaging to the consumers and businesses of both nations, and the contagion can grow to affect many aspects of both economies.\n\nA trade war that begins in one sector can grow to affect other sectors. Likewise, a trade war that [begins between two countries](https:\/\/www.investopedia.com\/penguins-and-trumps-tariff-war-11711309) can affect other countries not initially involved in the trade war.\n\n### Trade War vs. Other Protectionist Actions\nA trade war is distinct from other actions taken to control imports and exports, such as sanctions. The trade war has detrimental effects on the trading relationship between two countries because its goals are related specifically to trade. Sanctions may have philanthropic goals.\n\nOther non-tariff protectionist policies can be implemented by placing a cap on import quotas, setting clear product standards, or implementing government subsidies for processes to deter outsourcing.\n\n## History of Trade Wars\nTrade wars are not an invention of modern society. Such battles have been going on for as long as nations have conducted trade with one another.\n\nFor example, colonial powers fought with each other over the right to trade exclusively with overseas colonies in the 17th century.\n\n### British-China\nThe British Empire has a long history of such trade battles. One example is the opium wars of the 19th century with China.\n\nThe British had been sending India-produced opium into China for years when the Chinese emperor decreed it to be illegal. Attempts to settle the conflict failed, and the emperor eventually sent troops to confiscate the drugs.\n\nHowever, the might of the British navy prevailed, and China conceded to the entry of additional foreign trade into the nation.\n\n### U.S.-Europe\nIn 1930, the United States enacted the [Smoot-Hawley Tariff Act](https:\/\/www.investopedia.com\/terms\/s\/smoot-hawley-tariff-act.asp), raising tariffs to protect American farmers from European agricultural products.1\n\nThis act increased already hefty import duties to almost 40%. In response, several nations retaliated against the U.S. by imposing their own higher tariffs, and global trade declined worldwide.\n\nAs America entered the Great Depression, which was aided greatly by disastrous trade policies, President Roosevelt began to pass several acts to reduce trade barriers, including the Reciprocal Trade Agreements Act.2\n\n### U.S.-China and Others\nBeginning in January 2018, President Trump imposed a series of tariffs on everything from steel and aluminum to solar panels and washing machines.3\n\nSome of the effects impacted goods from the [European Union (EU)](https:\/\/www.investopedia.com\/terms\/e\/europeanunion.asp) and Canada, as well as China and Mexico. Canada retaliated by imposing a series of temporary duties on American steel and other products.\n\nThe EU also imposed tariffs on American agricultural imports and other products, including Harley Davidson motorcycles.4\n\nBy May 2019, tariffs on Chinese imports impacted nearly \\$200 billion of imports.5 As with all trade wars, China retaliated and imposed stiff duties on American imports.\n\nA study by the [International Monetary Fund (IMF)](https:\/\/www.investopedia.com\/terms\/i\/imf.asp) found that U.S. importers of goods primarily shouldered the cost of the [tariffs on Chinese goods](https:\/\/www.investopedia.com\/tariffs-on-chinese-goods-8773900).6\n\nThese costs were eventually passed on to the American consumer in the form of higher prices, which was not what the trade war was intended to accomplish.6\n\n### Important\nAlthough the U.S. and Russia were not engaged in a trade war, President Joe Biden announced [sanctions](https:\/\/www.investopedia.com\/articles\/economics\/10\/economic-sanctions.asp) against Russia on Feb. 22, 2022, in response to Russia's military aggression against Ukraine. The sanctions included blocking the funds of two Russian banks that financed the military, market restrictions on Russian sovereign debt, and the targeting of individual Russian elites.7\n## Advantages and Disadvantages of a Trade War\nThe advantages and disadvantages of trade wars in particular, and protectionism in general, are the subject of fierce and ongoing debate.\n\n### Advantages\nProponents of protectionism argue that well-crafted policies provide [competitive advantages](https:\/\/www.investopedia.com\/terms\/c\/competitive_advantage.asp). By blocking or discouraging imports, protective policies throw more business toward the domestic producers, which ultimately creates more American employment.\n\nThese policies can also serve to overcome a trade deficit. Additionally, proponents believe that painful tariffs and trade wars may be the only effective way to deal with a nation that continues unfair or unethical trading policies.\n\n### Disadvantages\nCritics argue that protectionism often hurts the people it is intended to protect by choking off markets and slowing economic growth and cultural exchange.\n\nConsumers may begin to have less choice in the marketplace. They may even face shortages if there is no ready domestic substitute for the imported goods that tariffs have impacted or eliminated.\n\nHaving to pay more for raw materials hurts manufacturers' profit margins. As a result, trade wars can lead to price increases, with manufactured goods, in particular, becoming more expensive. This can then spark [inflation](https:\/\/www.investopedia.com\/terms\/i\/inflation.asp) in the local economy, overall.\n\nPros\n\n- Protects domestic companies from unfair competition\n- Increases demand for domestic goods\n- Promotes local job growth\n- Improves trade deficits\n- Punishes nation with unethical trade policies\n\nCons\n\n- Increases costs and induces inflation\n- Causes marketplace shortages, reduces choice\n- Discourages trade\n- Slows economic growth\n- Hurts diplomatic relations, cultural exchange\n## Notable Trade War Example\nWhile running for President in 2016, Donald Trump expressed his disdain for many current trade agreements, promising to bring manufacturing jobs back to the U.S. from other nations where they had been outsourced, such as China and India.\n\n### 2018\nAfter his election, he embarked on a protectionist campaign. President Trump also threatened to pull the U.S. out of the World Trade Organization (WTO), an impartial, international entity that regulates and arbitrates trade among the over 160 countries that belong to it.89\n\nIn early 2018, President Trump stepped up his efforts, particularly against China. He threatened a substantial fine over alleged intellectual property (IP) theft and significant tariffs. The Chinese retaliated with a 25% tax on over 100 U.S. products.10\n\nThroughout 2018, the two nations continued to threaten each other, releasing lists of proposed tariffs on various goods. Although China responded with tariffs of its own, the American duties did have an impact on the Chinese economy, hurting manufacturers and causing a slowdown.\n\n### 2019\nIn December, each nation agreed to halt the imposition of any new taxes. The tariff war cease-fire continued into 2019. In the spring, China and the U.S. seemed on the verge of a trade agreement.\n\nAt the beginning of May, Chinese officials took a new hard line in negotiations, refusing to make changes in their company-subsidizing laws and insisting on the lifting of the current tariffs.\n\nAngered by this apparent backtracking, the President doubled down, announcing on May 5, 2019, that he was going to increase tariffs, as of May 10, from 10% to 25% on \\$200 billion worth of Chinese imports.5\n\nHe may have felt emboldened by the fact that the U.S. trade deficit with China had fallen to its lowest level since 2014.\n\nChina halted all imports of farm products by state-owned firms in retaliation. The Asian nation's central bank also weakened the yuan above the seven per dollar reference rate for the first time in over a decade, leading to concerns about a [currency war](https:\/\/www.investopedia.com\/articles\/forex\/042015\/what-currency-war-how-does-it-work.asp).\n\n### 2020\nPerhaps realizing that this was mutually destructive, the U.S. and China agreed to a trade deal that was signed on Jan. 15, 2020.11\n\n### 2024\nHowever, the U.S. continued raising trade barriers. In 2024, President Biden raised the tariffs on electric vehicles to 100%, with solar cells and semiconductors facing tariffs of 50%.12\n\nOther technology products also faced sharp tariff increases, causing China to pledge further retaliation.13\n\n## Is the United States in a Trade War With China?\nYes. In 2024, the U.S. implemented extreme tariffs that some experts described as a trade war. President Biden raised the tariff on Chinese electric vehicles to 100%, and increased the tariff on lithium-ion batteries to 25%. The tax rates on solar cells and semiconductors increased to 50%. These tariffs were meant to protect domestic industries, at the cost of denying Americans access to cheaper Chinese technologies. As of early 2025, it was expected that President Trump might continue to impose and\/or raise tariffs, and not just on China, but on Mexico and Canada, as well.14\n\n## How Do Tariffs Affect the Economy?\nLike other trade policies, tariffs on trade have both winners and losers. Tariffs can generate billions of dollars of added revenue for a country. Domestic industries and manufacturers tend to benefit. Consumers and producers who use those products associated with tariffs have to pay higher prices, which can have an inflationary effect on the rest of the economy. As for retaliatory tariffs imposed by foreign countries on the U.S., they make exports more expensive to buyers in those countries but reduce U.S. GDP by a negligible amount.15\n\n## Are Tariffs Good or Bad for the Economy?\nMost economists agree that tariffs are bad for the economy, since they prevent countries from reaping the benefits of economic [specialization](https:\/\/www.investopedia.com\/terms\/s\/specialization.asp). However, there may be additional benefits to protecting certain domestic industries, such as manufacturing or defense. While it may be cheaper for a country to source arms on the world market, there are also strategic advantages to maintaining domestic production capacity, even if such products are available at lower prices elsewhere.\n## The Bottom Line\nA trade war occurs when a government imposes punitive tariffs on another country, often in response to tariffs or protectionist trade policies raised by the other nation.\n\nTrade wars tend to be mutually damaging, as higher costs of trade ultimately are paid by consumers. However, advocates believe that trade wars can help protect local industries.","meta_canonical":null}

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Boilerpipe Text	Key Takeaways A trade war arises when countries impose tariffs and restrictions on each other's imports. Tariffs are taxes on imports that increase the cost of foreign goods. Trade wars can lead to economic tensions and impact global trade dynamics. Countries may engage in trade wars to protect local industries from foreign competition. The impact of trade wars extends to consumers, businesses, and international relations. Get personalized, AI-powered answers built on 27+ years of trusted expertise. What Is a Trade War? A trade war is an economic dispute between two countries. It can occur when one country retaliates against another's perceived unfair trading practices with restrictions, such as tariffs, on imports. Domestic trade unions or industry lobbyists can pressure politicians to make imported goods less attractive to consumers, pushing international policy toward a trade war. Also, trade wars are often a result of a misunderstanding of the widespread benefits of free trade . Understanding a Trade War Trade wars are usually considered a side effect of protectionism . Protectionism refers to government actions and policies that restrict international trade. A country will generally undertake protectionist actions to shield domestic businesses and jobs from foreign competition. Protectionism is also a method used to balance trade deficits . A trade deficit occurs when a country's imports exceed the amounts of its exports. A tariff is a tax or duty imposed on the goods imported into a nation. Growth of Damaging Effects In an era of global trade, a trade war can become very damaging to the consumers and businesses of both nations, and the contagion can grow to affect many aspects of both economies. A trade war that begins in one sector can grow to affect other sectors. Likewise, a trade war that begins between two countries can affect other countries not initially involved in the trade war. Trade War vs. Other Protectionist Actions A trade war is distinct from other actions taken to control imports and exports, such as sanctions. The trade war has detrimental effects on the trading relationship between two countries because its goals are related specifically to trade. Sanctions may have philanthropic goals. Other non-tariff protectionist policies can be implemented by placing a cap on import quotas, setting clear product standards, or implementing government subsidies for processes to deter outsourcing. History of Trade Wars Trade wars are not an invention of modern society. Such battles have been going on for as long as nations have conducted trade with one another. For example, colonial powers fought with each other over the right to trade exclusively with overseas colonies in the 17th century. British-China The British Empire has a long history of such trade battles. One example is the opium wars of the 19th century with China. The British had been sending India-produced opium into China for years when the Chinese emperor decreed it to be illegal. Attempts to settle the conflict failed, and the emperor eventually sent troops to confiscate the drugs. However, the might of the British navy prevailed, and China conceded to the entry of additional foreign trade into the nation. U.S.-Europe In 1930, the United States enacted the Smoot-Hawley Tariff Act , raising tariffs to protect American farmers from European agricultural products. 1 This act increased already hefty import duties to almost 40%. In response, several nations retaliated against the U.S. by imposing their own higher tariffs, and global trade declined worldwide. As America entered the Great Depression, which was aided greatly by disastrous trade policies, President Roosevelt began to pass several acts to reduce trade barriers, including the Reciprocal Trade Agreements Act. 2 U.S.-China and Others Beginning in January 2018, President Trump imposed a series of tariffs on everything from steel and aluminum to solar panels and washing machines. 3 Some of the effects impacted goods from the European Union (EU) and Canada, as well as China and Mexico. Canada retaliated by imposing a series of temporary duties on American steel and other products. The EU also imposed tariffs on American agricultural imports and other products, including Harley Davidson motorcycles. 4 By May 2019, tariffs on Chinese imports impacted nearly $200 billion of imports. 5 As with all trade wars, China retaliated and imposed stiff duties on American imports. A study by the International Monetary Fund (IMF) found that U.S. importers of goods primarily shouldered the cost of the tariffs on Chinese goods . 6 These costs were eventually passed on to the American consumer in the form of higher prices, which was not what the trade war was intended to accomplish. 6 Important Although the U.S. and Russia were not engaged in a trade war, President Joe Biden announced sanctions against Russia on Feb. 22, 2022, in response to Russia's military aggression against Ukraine. The sanctions included blocking the funds of two Russian banks that financed the military, market restrictions on Russian sovereign debt, and the targeting of individual Russian elites. 7 Advantages and Disadvantages of a Trade War The advantages and disadvantages of trade wars in particular, and protectionism in general, are the subject of fierce and ongoing debate. Advantages Proponents of protectionism argue that well-crafted policies provide competitive advantages . By blocking or discouraging imports, protective policies throw more business toward the domestic producers, which ultimately creates more American employment. These policies can also serve to overcome a trade deficit. Additionally, proponents believe that painful tariffs and trade wars may be the only effective way to deal with a nation that continues unfair or unethical trading policies. Disadvantages Critics argue that protectionism often hurts the people it is intended to protect by choking off markets and slowing economic growth and cultural exchange. Consumers may begin to have less choice in the marketplace. They may even face shortages if there is no ready domestic substitute for the imported goods that tariffs have impacted or eliminated. Having to pay more for raw materials hurts manufacturers' profit margins. As a result, trade wars can lead to price increases, with manufactured goods, in particular, becoming more expensive. This can then spark inflation in the local economy, overall. Pros Protects domestic companies from unfair competition Increases demand for domestic goods Promotes local job growth Improves trade deficits Punishes nation with unethical trade policies Cons Increases costs and induces inflation Causes marketplace shortages, reduces choice Discourages trade Slows economic growth Hurts diplomatic relations, cultural exchange Notable Trade War Example While running for President in 2016, Donald Trump expressed his disdain for many current trade agreements, promising to bring manufacturing jobs back to the U.S. from other nations where they had been outsourced, such as China and India. 2018 After his election, he embarked on a protectionist campaign. President Trump also threatened to pull the U.S. out of the World Trade Organization (WTO), an impartial, international entity that regulates and arbitrates trade among the over 160 countries that belong to it. 8 9 In early 2018, President Trump stepped up his efforts, particularly against China. He threatened a substantial fine over alleged intellectual property (IP) theft and significant tariffs. The Chinese retaliated with a 25% tax on over 100 U.S. products. 10 Throughout 2018, the two nations continued to threaten each other, releasing lists of proposed tariffs on various goods. Although China responded with tariffs of its own, the American duties did have an impact on the Chinese economy, hurting manufacturers and causing a slowdown. 2019 In December, each nation agreed to halt the imposition of any new taxes. The tariff war cease-fire continued into 2019. In the spring, China and the U.S. seemed on the verge of a trade agreement. At the beginning of May, Chinese officials took a new hard line in negotiations, refusing to make changes in their company-subsidizing laws and insisting on the lifting of the current tariffs. Angered by this apparent backtracking, the President doubled down, announcing on May 5, 2019, that he was going to increase tariffs, as of May 10, from 10% to 25% on $200 billion worth of Chinese imports. 5 He may have felt emboldened by the fact that the U.S. trade deficit with China had fallen to its lowest level since 2014. China halted all imports of farm products by state-owned firms in retaliation. The Asian nation's central bank also weakened the yuan above the seven per dollar reference rate for the first time in over a decade, leading to concerns about a currency war . 2020 Perhaps realizing that this was mutually destructive, the U.S. and China agreed to a trade deal that was signed on Jan. 15, 2020. 11 2024 However, the U.S. continued raising trade barriers. In 2024, President Biden raised the tariffs on electric vehicles to 100%, with solar cells and semiconductors facing tariffs of 50%. 12 Other technology products also faced sharp tariff increases, causing China to pledge further retaliation. 13 Is the United States in a Trade War With China? Yes. In 2024, the U.S. implemented extreme tariffs that some experts described as a trade war. President Biden raised the tariff on Chinese electric vehicles to 100%, and increased the tariff on lithium-ion batteries to 25%. The tax rates on solar cells and semiconductors increased to 50%. These tariffs were meant to protect domestic industries, at the cost of denying Americans access to cheaper Chinese technologies. As of early 2025, it was expected that President Trump might continue to impose and/or raise tariffs, and not just on China, but on Mexico and Canada, as well. 14 How Do Tariffs Affect the Economy? Like other trade policies, tariffs on trade have both winners and losers. Tariffs can generate billions of dollars of added revenue for a country. Domestic industries and manufacturers tend to benefit. Consumers and producers who use those products associated with tariffs have to pay higher prices, which can have an inflationary effect on the rest of the economy. As for retaliatory tariffs imposed by foreign countries on the U.S., they make exports more expensive to buyers in those countries but reduce U.S. GDP by a negligible amount. 15 Are Tariffs Good or Bad for the Economy? Most economists agree that tariffs are bad for the economy, since they prevent countries from reaping the benefits of economic specialization . However, there may be additional benefits to protecting certain domestic industries, such as manufacturing or defense. While it may be cheaper for a country to source arms on the world market, there are also strategic advantages to maintaining domestic production capacity, even if such products are available at lower prices elsewhere. The Bottom Line A trade war occurs when a government imposes punitive tariffs on another country, often in response to tariffs or protectionist trade policies raised by the other nation. Trade wars tend to be mutually damaging, as higher costs of trade ultimately are paid by consumers. However, advocates believe that trade wars can help protect local industries.
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Learn about our [editorial policies](https://www.investopedia.com/legal-4768893#editorial-policy) Updated January 23, 2026 Reviewed by [Robert C. Kelly](https://www.investopedia.com/robert-c-kelly-4799779) ![Robert C. Kelly]() ![Robert C. Kelly](https://www.investopedia.com/thmb/UG8EPP4nOD_hJeBX9pDBhUYUOhI=/200x200/filters:no_upscale:max_bytes$150000$:strip_icc/ScreenShot2020-03-23at2.04.43PM-8377f81c52324df1b62241b6fddc9d2d.png) Reviewed by Robert C. Kelly [Full Bio](https://www.investopedia.com/robert-c-kelly-4799779) Robert Kelly is managing director of XTS Energy LLC, and has more than three decades of experience as a business executive. He is a professor of economics and has raised more than \$4.5 billion in investment capital. 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Learn about our [editorial policies](https://www.investopedia.com/legal-4768893#editorial-policy) ![Trade Wars: When one country retaliates against another by raising import tariffs or placing other restrictions on imports.](https://www.investopedia.com/thmb/HXCJOEZb11AmMDIUTBjb2NSCybo=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/trade-war.asp-final-45307600c89942218c8dec8aa90367ee.png) ![Trade Wars: When one country retaliates against another by raising import tariffs or placing other restrictions on imports.](https://www.investopedia.com/thmb/HXCJOEZb11AmMDIUTBjb2NSCybo=/1500x0/filters:no_upscale:max_bytes$150000$:strip_icc/trade-war.asp-final-45307600c89942218c8dec8aa90367ee.png) Zoe Hansen / Investopedia Close ### Key Takeaways - A trade war arises when countries impose tariffs and restrictions on each other's imports. - Tariffs are taxes on imports that increase the cost of foreign goods. - Trade wars can lead to economic tensions and impact global trade dynamics. - Countries may engage in trade wars to protect local industries from foreign competition. - The impact of trade wars extends to consumers, businesses, and international relations. Get personalized, AI-powered answers built on 27+ years of trusted expertise. ASK ## What Is a Trade War? A trade war is an economic dispute between two countries. It can occur when one country retaliates against another's perceived unfair trading practices with restrictions, such as tariffs, on imports. Domestic trade unions or industry lobbyists can pressure politicians to make imported goods less attractive to consumers, pushing international policy toward a trade war. Also, trade wars are often a result of a misunderstanding of the widespread benefits of [free trade](https://www.investopedia.com/terms/f/free-trade.asp). ## Understanding a Trade War Trade wars are usually considered a side effect of [protectionism](https://www.investopedia.com/terms/p/protectionism.asp). Protectionism refers to government actions and policies that restrict international trade. A country will generally undertake protectionist actions to shield domestic businesses and jobs from foreign competition. Protectionism is also a method used to balance [trade deficits](https://www.investopedia.com/terms/t/trade_deficit.asp). A trade deficit occurs when a country's imports exceed the amounts of its exports. A tariff is a tax or duty imposed on the goods imported into a nation. ### Growth of Damaging Effects In an era of global trade, a trade war can become very damaging to the consumers and businesses of both nations, and the contagion can grow to affect many aspects of both economies. A trade war that begins in one sector can grow to affect other sectors. Likewise, a trade war that [begins between two countries](https://www.investopedia.com/penguins-and-trumps-tariff-war-11711309) can affect other countries not initially involved in the trade war. ### Trade War vs. Other Protectionist Actions A trade war is distinct from other actions taken to control imports and exports, such as sanctions. The trade war has detrimental effects on the trading relationship between two countries because its goals are related specifically to trade. Sanctions may have philanthropic goals. Other non-tariff protectionist policies can be implemented by placing a cap on import quotas, setting clear product standards, or implementing government subsidies for processes to deter outsourcing. ## History of Trade Wars Trade wars are not an invention of modern society. Such battles have been going on for as long as nations have conducted trade with one another. For example, colonial powers fought with each other over the right to trade exclusively with overseas colonies in the 17th century. ### British-China The British Empire has a long history of such trade battles. One example is the opium wars of the 19th century with China. The British had been sending India-produced opium into China for years when the Chinese emperor decreed it to be illegal. Attempts to settle the conflict failed, and the emperor eventually sent troops to confiscate the drugs. However, the might of the British navy prevailed, and China conceded to the entry of additional foreign trade into the nation. ### U.S.-Europe In 1930, the United States enacted the [Smoot-Hawley Tariff Act](https://www.investopedia.com/terms/s/smoot-hawley-tariff-act.asp), raising tariffs to protect American farmers from European agricultural products.1 This act increased already hefty import duties to almost 40%. In response, several nations retaliated against the U.S. by imposing their own higher tariffs, and global trade declined worldwide. As America entered the Great Depression, which was aided greatly by disastrous trade policies, President Roosevelt began to pass several acts to reduce trade barriers, including the Reciprocal Trade Agreements Act.2 ### U.S.-China and Others Beginning in January 2018, President Trump imposed a series of tariffs on everything from steel and aluminum to solar panels and washing machines.3 Some of the effects impacted goods from the [European Union (EU)](https://www.investopedia.com/terms/e/europeanunion.asp) and Canada, as well as China and Mexico. Canada retaliated by imposing a series of temporary duties on American steel and other products. The EU also imposed tariffs on American agricultural imports and other products, including Harley Davidson motorcycles.4 By May 2019, tariffs on Chinese imports impacted nearly \$200 billion of imports.5 As with all trade wars, China retaliated and imposed stiff duties on American imports. A study by the [International Monetary Fund (IMF)](https://www.investopedia.com/terms/i/imf.asp) found that U.S. importers of goods primarily shouldered the cost of the [tariffs on Chinese goods](https://www.investopedia.com/tariffs-on-chinese-goods-8773900).6 These costs were eventually passed on to the American consumer in the form of higher prices, which was not what the trade war was intended to accomplish.6 ### Important Although the U.S. and Russia were not engaged in a trade war, President Joe Biden announced [sanctions](https://www.investopedia.com/articles/economics/10/economic-sanctions.asp) against Russia on Feb. 22, 2022, in response to Russia's military aggression against Ukraine. The sanctions included blocking the funds of two Russian banks that financed the military, market restrictions on Russian sovereign debt, and the targeting of individual Russian elites.7 ## Advantages and Disadvantages of a Trade War The advantages and disadvantages of trade wars in particular, and protectionism in general, are the subject of fierce and ongoing debate. ### Advantages Proponents of protectionism argue that well-crafted policies provide [competitive advantages](https://www.investopedia.com/terms/c/competitive_advantage.asp). By blocking or discouraging imports, protective policies throw more business toward the domestic producers, which ultimately creates more American employment. These policies can also serve to overcome a trade deficit. Additionally, proponents believe that painful tariffs and trade wars may be the only effective way to deal with a nation that continues unfair or unethical trading policies. ### Disadvantages Critics argue that protectionism often hurts the people it is intended to protect by choking off markets and slowing economic growth and cultural exchange. Consumers may begin to have less choice in the marketplace. They may even face shortages if there is no ready domestic substitute for the imported goods that tariffs have impacted or eliminated. Having to pay more for raw materials hurts manufacturers' profit margins. As a result, trade wars can lead to price increases, with manufactured goods, in particular, becoming more expensive. This can then spark [inflation](https://www.investopedia.com/terms/i/inflation.asp) in the local economy, overall. Pros - Protects domestic companies from unfair competition - Increases demand for domestic goods - Promotes local job growth - Improves trade deficits - Punishes nation with unethical trade policies Cons - Increases costs and induces inflation - Causes marketplace shortages, reduces choice - Discourages trade - Slows economic growth - Hurts diplomatic relations, cultural exchange ## Notable Trade War Example While running for President in 2016, Donald Trump expressed his disdain for many current trade agreements, promising to bring manufacturing jobs back to the U.S. from other nations where they had been outsourced, such as China and India. ### 2018 After his election, he embarked on a protectionist campaign. President Trump also threatened to pull the U.S. out of the World Trade Organization (WTO), an impartial, international entity that regulates and arbitrates trade among the over 160 countries that belong to it.89 In early 2018, President Trump stepped up his efforts, particularly against China. He threatened a substantial fine over alleged intellectual property (IP) theft and significant tariffs. The Chinese retaliated with a 25% tax on over 100 U.S. products.10 Throughout 2018, the two nations continued to threaten each other, releasing lists of proposed tariffs on various goods. Although China responded with tariffs of its own, the American duties did have an impact on the Chinese economy, hurting manufacturers and causing a slowdown. ### 2019 In December, each nation agreed to halt the imposition of any new taxes. The tariff war cease-fire continued into 2019. In the spring, China and the U.S. seemed on the verge of a trade agreement. At the beginning of May, Chinese officials took a new hard line in negotiations, refusing to make changes in their company-subsidizing laws and insisting on the lifting of the current tariffs. Angered by this apparent backtracking, the President doubled down, announcing on May 5, 2019, that he was going to increase tariffs, as of May 10, from 10% to 25% on \$200 billion worth of Chinese imports.5 He may have felt emboldened by the fact that the U.S. trade deficit with China had fallen to its lowest level since 2014. China halted all imports of farm products by state-owned firms in retaliation. The Asian nation's central bank also weakened the yuan above the seven per dollar reference rate for the first time in over a decade, leading to concerns about a [currency war](https://www.investopedia.com/articles/forex/042015/what-currency-war-how-does-it-work.asp). ### 2020 Perhaps realizing that this was mutually destructive, the U.S. and China agreed to a trade deal that was signed on Jan. 15, 2020.11 ### 2024 However, the U.S. continued raising trade barriers. In 2024, President Biden raised the tariffs on electric vehicles to 100%, with solar cells and semiconductors facing tariffs of 50%.12 Other technology products also faced sharp tariff increases, causing China to pledge further retaliation.13 ## Is the United States in a Trade War With China? Yes. In 2024, the U.S. implemented extreme tariffs that some experts described as a trade war. President Biden raised the tariff on Chinese electric vehicles to 100%, and increased the tariff on lithium-ion batteries to 25%. The tax rates on solar cells and semiconductors increased to 50%. These tariffs were meant to protect domestic industries, at the cost of denying Americans access to cheaper Chinese technologies. As of early 2025, it was expected that President Trump might continue to impose and/or raise tariffs, and not just on China, but on Mexico and Canada, as well.14 ## How Do Tariffs Affect the Economy? Like other trade policies, tariffs on trade have both winners and losers. Tariffs can generate billions of dollars of added revenue for a country. Domestic industries and manufacturers tend to benefit. Consumers and producers who use those products associated with tariffs have to pay higher prices, which can have an inflationary effect on the rest of the economy. As for retaliatory tariffs imposed by foreign countries on the U.S., they make exports more expensive to buyers in those countries but reduce U.S. GDP by a negligible amount.15 ## Are Tariffs Good or Bad for the Economy? Most economists agree that tariffs are bad for the economy, since they prevent countries from reaping the benefits of economic [specialization](https://www.investopedia.com/terms/s/specialization.asp). However, there may be additional benefits to protecting certain domestic industries, such as manufacturing or defense. While it may be cheaper for a country to source arms on the world market, there are also strategic advantages to maintaining domestic production capacity, even if such products are available at lower prices elsewhere. ## The Bottom Line A trade war occurs when a government imposes punitive tariffs on another country, often in response to tariffs or protectionist trade policies raised by the other nation. Trade wars tend to be mutually damaging, as higher costs of trade ultimately are paid by consumers. However, advocates believe that trade wars can help protect local industries. Get personalized, AI-powered answers built on 27+ years of trusted expertise. - [What is a currency war, an economic conflict?](https://www.investopedia.com/terms/t/trade-war.asp) - [What is a balance of trade?](https://www.investopedia.com/terms/t/trade-war.asp) - [Why do governments implement tariffs?](https://www.investopedia.com/terms/t/trade-war.asp) ASK Article Sources Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our [editorial policy.](https://www.investopedia.com/legal-4768893#EditorialPolicy) 1. United States Senate. "[The Senate Passes the Smoot-Hawley Tariff](https://www.senate.gov/artandhistory/history/minute/Senate_Passes_Smoot_Hawley_Tariff.htm)." 2. Office of the United States Trade Representative. "[Eighty Years After the Reciprocal Trade Agreements Act](https://ustr.gov/about-us/policy-offices/press-office/blog/2014/June/Eighty-years-of-the-Reciprocal-Trade-Agreements-Act)." 3. Office of the United States Trade Representative. "[Trump Administration Sends Annual Trade Agenda Report to Congress](https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/february/trump-administration-sends-annual)." 4. Harley Davidson Inc. "[Harley-Davidson, Inc. To Vigorously Defend Its Position Following Aggressive EU Tariff Ruling](https://investor.harley-davidson.com/news/news-details/2021/Harley-Davidson-Inc.-To-Vigorously-Defend-Its-Position-Following-Aggressive-EU-Tariff-Ruling/default.aspx)." 5. Tax Foundation. "[Tracking the Economic Impact of U.S. Tariffs and Retaliatory Actions](https://taxfoundation.org/tariffs-trump-trade-war)." 6. International Monetary Fund. "[The Impact of US-China Trade Tensions](https://blogs.imf.org/2019/05/23/the-impact-of-us-china-trade-tensions/)." 7. The American Presidency Project. "[Fact Sheet: United States Imposes First Tranche of Swift and Severe Costs on Russia](https://www.presidency.ucsb.edu/documents/fact-sheet-united-states-imposes-first-tranche-swift-and-severe-costs-russia)." 8. Roll Call. "[Trump’s Threat to Leave the WTO Alarms Many, Even in Congress](https://rollcall.com/2018/08/03/trumps-threat-to-leave-the-wto-alarms-many-even-in-congress/)." 9. World Trade Organization. "[Members and Observers](https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm)." 10. Reuters. "[Exclusive: Trump Considers Big 'Fine' Over China Intellectual Property Theft](https://www.reuters.com/article/business/exclusive-trump-considers-big-fine-over-china-intellectual-property-theft-idUSKBN1F62SQ/)." 11. Office of the United States Trade Representative. "[Rebalancing United States-China Trade](https://ustr.gov/phase-one)." 12. The White House. "[FACT SHEET: President Biden Takes Action to Protect American Workers and Businesses from China’s Unfair Trade Practices](https://www.whitehouse.gov/briefing-room/statements-releases/2024/05/14/fact-sheet-president-biden-takes-action-to-protect-american-workers-and-businesses-from-chinas-unfair-trade-practices/#:~:text=In%20response%20to%20China's%20unfair,protect%20American%20workers%20and%20businesses.)." 13. CNN. "[What Biden's Tariffs on Chinese Imports Might Mean for American Jobs, the Economy and Inflation](https://www.cnn.com/2024/05/14/economy/inflation-new-china-tariffs-biden-example/index.html)." 14. Reuters. "[North America Braces for New Trump Tariffs as Saturday Deadline Nears](https://www.reuters.com/world/americas/north-america-braces-new-trump-tariffs-saturday-deadline-nears-2025-01-31/)." 15. Tax Foundation. "[Trump Tariffs: Tracking the Economic Impact of the Trump Trade War](https://taxfoundation.org/research/all/federal/trump-tariffs-trade-war/#:~:text=Retaliatory%20tariffs%20are%20imposed%20by,competitively%20priced%20in%20foreign%20markets.)." 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Readable Markdown	### Key Takeaways - A trade war arises when countries impose tariffs and restrictions on each other's imports. - Tariffs are taxes on imports that increase the cost of foreign goods. - Trade wars can lead to economic tensions and impact global trade dynamics. - Countries may engage in trade wars to protect local industries from foreign competition. - The impact of trade wars extends to consumers, businesses, and international relations. Get personalized, AI-powered answers built on 27+ years of trusted expertise. ## What Is a Trade War? A trade war is an economic dispute between two countries. It can occur when one country retaliates against another's perceived unfair trading practices with restrictions, such as tariffs, on imports. Domestic trade unions or industry lobbyists can pressure politicians to make imported goods less attractive to consumers, pushing international policy toward a trade war. Also, trade wars are often a result of a misunderstanding of the widespread benefits of [free trade](https://www.investopedia.com/terms/f/free-trade.asp). ## Understanding a Trade War Trade wars are usually considered a side effect of [protectionism](https://www.investopedia.com/terms/p/protectionism.asp). Protectionism refers to government actions and policies that restrict international trade. A country will generally undertake protectionist actions to shield domestic businesses and jobs from foreign competition. Protectionism is also a method used to balance [trade deficits](https://www.investopedia.com/terms/t/trade_deficit.asp). A trade deficit occurs when a country's imports exceed the amounts of its exports. A tariff is a tax or duty imposed on the goods imported into a nation. ### Growth of Damaging Effects In an era of global trade, a trade war can become very damaging to the consumers and businesses of both nations, and the contagion can grow to affect many aspects of both economies. A trade war that begins in one sector can grow to affect other sectors. Likewise, a trade war that [begins between two countries](https://www.investopedia.com/penguins-and-trumps-tariff-war-11711309) can affect other countries not initially involved in the trade war. ### Trade War vs. Other Protectionist Actions A trade war is distinct from other actions taken to control imports and exports, such as sanctions. The trade war has detrimental effects on the trading relationship between two countries because its goals are related specifically to trade. Sanctions may have philanthropic goals. Other non-tariff protectionist policies can be implemented by placing a cap on import quotas, setting clear product standards, or implementing government subsidies for processes to deter outsourcing. ## History of Trade Wars Trade wars are not an invention of modern society. Such battles have been going on for as long as nations have conducted trade with one another. For example, colonial powers fought with each other over the right to trade exclusively with overseas colonies in the 17th century. ### British-China The British Empire has a long history of such trade battles. One example is the opium wars of the 19th century with China. The British had been sending India-produced opium into China for years when the Chinese emperor decreed it to be illegal. Attempts to settle the conflict failed, and the emperor eventually sent troops to confiscate the drugs. However, the might of the British navy prevailed, and China conceded to the entry of additional foreign trade into the nation. ### U.S.-Europe In 1930, the United States enacted the [Smoot-Hawley Tariff Act](https://www.investopedia.com/terms/s/smoot-hawley-tariff-act.asp), raising tariffs to protect American farmers from European agricultural products.1 This act increased already hefty import duties to almost 40%. In response, several nations retaliated against the U.S. by imposing their own higher tariffs, and global trade declined worldwide. As America entered the Great Depression, which was aided greatly by disastrous trade policies, President Roosevelt began to pass several acts to reduce trade barriers, including the Reciprocal Trade Agreements Act.2 ### U.S.-China and Others Beginning in January 2018, President Trump imposed a series of tariffs on everything from steel and aluminum to solar panels and washing machines.3 Some of the effects impacted goods from the [European Union (EU)](https://www.investopedia.com/terms/e/europeanunion.asp) and Canada, as well as China and Mexico. Canada retaliated by imposing a series of temporary duties on American steel and other products. The EU also imposed tariffs on American agricultural imports and other products, including Harley Davidson motorcycles.4 By May 2019, tariffs on Chinese imports impacted nearly \$200 billion of imports.5 As with all trade wars, China retaliated and imposed stiff duties on American imports. A study by the [International Monetary Fund (IMF)](https://www.investopedia.com/terms/i/imf.asp) found that U.S. importers of goods primarily shouldered the cost of the [tariffs on Chinese goods](https://www.investopedia.com/tariffs-on-chinese-goods-8773900).6 These costs were eventually passed on to the American consumer in the form of higher prices, which was not what the trade war was intended to accomplish.6 ### Important Although the U.S. and Russia were not engaged in a trade war, President Joe Biden announced [sanctions](https://www.investopedia.com/articles/economics/10/economic-sanctions.asp) against Russia on Feb. 22, 2022, in response to Russia's military aggression against Ukraine. The sanctions included blocking the funds of two Russian banks that financed the military, market restrictions on Russian sovereign debt, and the targeting of individual Russian elites.7 ## Advantages and Disadvantages of a Trade War The advantages and disadvantages of trade wars in particular, and protectionism in general, are the subject of fierce and ongoing debate. ### Advantages Proponents of protectionism argue that well-crafted policies provide [competitive advantages](https://www.investopedia.com/terms/c/competitive_advantage.asp). By blocking or discouraging imports, protective policies throw more business toward the domestic producers, which ultimately creates more American employment. These policies can also serve to overcome a trade deficit. Additionally, proponents believe that painful tariffs and trade wars may be the only effective way to deal with a nation that continues unfair or unethical trading policies. ### Disadvantages Critics argue that protectionism often hurts the people it is intended to protect by choking off markets and slowing economic growth and cultural exchange. Consumers may begin to have less choice in the marketplace. They may even face shortages if there is no ready domestic substitute for the imported goods that tariffs have impacted or eliminated. Having to pay more for raw materials hurts manufacturers' profit margins. As a result, trade wars can lead to price increases, with manufactured goods, in particular, becoming more expensive. This can then spark [inflation](https://www.investopedia.com/terms/i/inflation.asp) in the local economy, overall. Pros - Protects domestic companies from unfair competition - Increases demand for domestic goods - Promotes local job growth - Improves trade deficits - Punishes nation with unethical trade policies Cons - Increases costs and induces inflation - Causes marketplace shortages, reduces choice - Discourages trade - Slows economic growth - Hurts diplomatic relations, cultural exchange ## Notable Trade War Example While running for President in 2016, Donald Trump expressed his disdain for many current trade agreements, promising to bring manufacturing jobs back to the U.S. from other nations where they had been outsourced, such as China and India. ### 2018 After his election, he embarked on a protectionist campaign. President Trump also threatened to pull the U.S. out of the World Trade Organization (WTO), an impartial, international entity that regulates and arbitrates trade among the over 160 countries that belong to it.89 In early 2018, President Trump stepped up his efforts, particularly against China. He threatened a substantial fine over alleged intellectual property (IP) theft and significant tariffs. The Chinese retaliated with a 25% tax on over 100 U.S. products.10 Throughout 2018, the two nations continued to threaten each other, releasing lists of proposed tariffs on various goods. Although China responded with tariffs of its own, the American duties did have an impact on the Chinese economy, hurting manufacturers and causing a slowdown. ### 2019 In December, each nation agreed to halt the imposition of any new taxes. The tariff war cease-fire continued into 2019. In the spring, China and the U.S. seemed on the verge of a trade agreement. At the beginning of May, Chinese officials took a new hard line in negotiations, refusing to make changes in their company-subsidizing laws and insisting on the lifting of the current tariffs. Angered by this apparent backtracking, the President doubled down, announcing on May 5, 2019, that he was going to increase tariffs, as of May 10, from 10% to 25% on \$200 billion worth of Chinese imports.5 He may have felt emboldened by the fact that the U.S. trade deficit with China had fallen to its lowest level since 2014. China halted all imports of farm products by state-owned firms in retaliation. The Asian nation's central bank also weakened the yuan above the seven per dollar reference rate for the first time in over a decade, leading to concerns about a [currency war](https://www.investopedia.com/articles/forex/042015/what-currency-war-how-does-it-work.asp). ### 2020 Perhaps realizing that this was mutually destructive, the U.S. and China agreed to a trade deal that was signed on Jan. 15, 2020.11 ### 2024 However, the U.S. continued raising trade barriers. In 2024, President Biden raised the tariffs on electric vehicles to 100%, with solar cells and semiconductors facing tariffs of 50%.12 Other technology products also faced sharp tariff increases, causing China to pledge further retaliation.13 ## Is the United States in a Trade War With China? Yes. In 2024, the U.S. implemented extreme tariffs that some experts described as a trade war. President Biden raised the tariff on Chinese electric vehicles to 100%, and increased the tariff on lithium-ion batteries to 25%. The tax rates on solar cells and semiconductors increased to 50%. These tariffs were meant to protect domestic industries, at the cost of denying Americans access to cheaper Chinese technologies. As of early 2025, it was expected that President Trump might continue to impose and/or raise tariffs, and not just on China, but on Mexico and Canada, as well.14 ## How Do Tariffs Affect the Economy? Like other trade policies, tariffs on trade have both winners and losers. Tariffs can generate billions of dollars of added revenue for a country. Domestic industries and manufacturers tend to benefit. Consumers and producers who use those products associated with tariffs have to pay higher prices, which can have an inflationary effect on the rest of the economy. As for retaliatory tariffs imposed by foreign countries on the U.S., they make exports more expensive to buyers in those countries but reduce U.S. GDP by a negligible amount.15 ## Are Tariffs Good or Bad for the Economy? Most economists agree that tariffs are bad for the economy, since they prevent countries from reaping the benefits of economic [specialization](https://www.investopedia.com/terms/s/specialization.asp). However, there may be additional benefits to protecting certain domestic industries, such as manufacturing or defense. While it may be cheaper for a country to source arms on the world market, there are also strategic advantages to maintaining domestic production capacity, even if such products are available at lower prices elsewhere. ## The Bottom Line A trade war occurs when a government imposes punitive tariffs on another country, often in response to tariffs or protectionist trade policies raised by the other nation. Trade wars tend to be mutually damaging, as higher costs of trade ultimately are paid by consumers. However, advocates believe that trade wars can help protect local industries.
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