A trade war is an economic conflict that involves countries raising tariffs and other nontariff barriers against each other. A trade war may also feature a series of escalating tit-for-tat measures that each side increases in response to the other. This type of economic protectionism often results in slower growth, job losses, market volatility, and diminished international cooperation.
During the 2016 presidential campaign, Donald Trump called for bringing manufacturing jobs back to America and threatened to pull the US out of the World Trade Organization, an impartial international body that regulates trade among the 160 member nations. Since then, he has signed or threatened to sign several protectionist trade agreements and has raised tariffs against many of its trading partners.
In addition to tariffs, a trade war can involve other types of trade barriers, such as quotas that limit imports, subsidies that support domestic industries, and regulations that block foreign competition. For example, China has imposed export bans on rare earth minerals and begun antitrust investigations of US tech companies, including Google and Nvidia.
As a result of these trade barriers, prices for consumer goods increase, causing inflation. In the short term, this can help boost domestic demand for those products, but in the long run it can hurt economic growth and create problems for businesses and consumers alike. It can also lead to reduced investment and slow down global trade, particularly for developing nations that rely on exports to drive economic growth.