A trade war is a situation where countries engage in a retaliatory cycle, often involving the imposition of tariffs or other trade barriers in response to perceived unfair trade practices. This usually starts when a nation feels another is engaging in unfair trade, influenced possibly by domestic industries or labor groups lobbying for less competitive import conditions. Misunderstandings about the mutual benefits of open trade can also fuel these conflicts.

Protectionism—restricting international commerce to safeguard domestic businesses and jobs—often leads to trade wars. This method corrects trade imbalances, especially when a nation buys more than it exports. Tariffs and taxes on imported goods are a standard tool in this strategy. However, in a globally interconnected economy, trade wars can have far-reaching and negative impacts on the economies and populations of the involved nations, potentially spilling over into various sectors and affecting countries not initially involved.

The escalation of a trade war can begin in one industry but can quickly encompass other areas. This cycle of retaliatory measures, often born from protectionist attitudes, can have a broader impact than initially intended.

It's important to distinguish a trade war from other import and export regulation forms, such as sanctions. Trade wars focus specifically on trade-related objectives and can negatively impact the trading relationship between countries. In contrast, sanctions might be applied for more diverse goals, including humanitarian purposes.

Protectionist policies in a trade war can also manifest as import quotas, rigorous product standards, or even domestic subsidies that discourage outsourcing, all aimed at reducing foreign competition and protecting local industries.

The US China Trade War

The U.S. trade gap with China has persisted for years. This gap was $419 billion in 2018, primarily due to imports of Chinese electronics and clothing. The U.S., in turn, exported significantly less, focusing on aircraft, machinery, and vehicles.

The Trump administration's primary goals were to reduce this deficit and restrict technology transfer to Chinese companies. The "Made in China 2025" initiative targeted robots and artificial intelligence, and China's trade secret requirements were contentious. The U.S. increased taxes on $250 billion of Chinese goods, costing American families $414 annually.

Tariff Measures

In May 2019, tariffs were increased to 25% on $200 billion worth of goods, escalating the financial impact on U.S. households to approximately $831 annually. Further threats to extend tariffs to more Chinese imports were made, but delays were announced to facilitate trade talks.

China imposed a 25% tax on $60 billion in U.S. imports. China selling part of its large U.S. debt holdings may have hurt the economy.

Throughout 2018 and 2019, a series of additional tariffs and negotiations unfolded. China retaliated on U.S. imports with taxes on solar panels, washing machines, $60 billion in Chinese goods, and intellectual property. Reducing vehicle tariffs and increasing access to China's banking sector were successful U.S. requests.

Impact on Agriculture and Manufacturing

Soybean farmers were significantly affected in the agricultural sector. China, one of the biggest consumers of US soybean suppliers, had to find alternative sources, which brought an excess in the supply and low prices in the USA. Also, the manufacturing industry faced problems because it became cheaper for the car makers to construct their goods in the

Tariff scopes kept widening until they encompassed many commodities and sectors. The U.S. imposed $200 billion worth of additional tariffs on China’s various consumer products in response. China warned of further reprisal action that could prove detrimental to global economies and oil deliveries into the United States.

Higher-level summits, such as that of the two Presidents, Trump versus Xi Jinping in the G20 conference, triggered a momentary truce and postponed raising the levies. The meetings discussed several vital areas, such as intellectual property and cyber security.

China's Purchasing Commitments and Legal Actions

The negotiations involved China committing to purchase large quantities of U.S. products such as soybeans. However, the US addressed its worries about Chinese intellectual property theft, culminating in legal proceedings against some Chinese nationals.

The situation was defused in an early 2019 move by the US instead of threats of a 25% tariff hanging over its head. However, this proved to be a milestone in the trade war as the two countries continued with talks and negotiations regarding their differences

U.S.-China Trade War on Global Markets

The US China trade war surprised the globe. With decreased Sino-American trade, other nations found opportunities to bridge the gap. Contrary to the notion of diminishing global trade, a study by the National Bureau of Economic Research highlighted a 3% surge in worldwide trade indirectly caused by this trade war. Nations like France, which already had solid international trade infrastructures, benefited significantly. They quickly increased their exports, taking over the market space vacated by Chinese and American traders.

How the Trade War Influences You

Due to the trade war, everyday products, especially those involving steel and aluminum, have seen a price hike. This includes everyday items like clothes hangers, heavy equipment materials, and even computer and tool components.

The Alliance of Automobile Manufacturers has warned about the rising costs of American-made steel once cheaper imports are blocked. The tariffs not only inflate the prices of vehicles for consumers but also reduce the variety of options available and provoke retaliatory measures from trading partners.

Furthermore, tariffs imposed on American exports by other countries make these goods pricier. American exporters might be forced to reduce costs and lay off employees to stay competitive. If they can't keep up, further cost-cutting or business closures could occur.

In a broader perspective, trade conflicts like these hinder economic growth over time. They often lead to increased layoffs as countries engage in retaliatory measures. Such actions will damage nearly 12 million American personnel whose jobs relate to exportation.

Analysts at Oxford Economics predict a loss of up to $800 billion for the global economy and a possible decline of the world output by 0.4% caused by the shrinking of business activities.

Trade wars can also cripple domestic industries in the long run. These industries are not under pressure from competition internationally since these entities only operate within their own country. In the long run, this might cause deterioration in the quality level of homemade products compared with those imported.