What are Trade Wars?

Although the old British Empire has been blamed for many of the bad things in this world today, one good thing it was mainly responsible for was international trade on a global scale. Today global trade is part of everyday life with, not just most countries partaking in it, but many now depending on it for their very existence financially. It is for this dependence on international trade which makes trade wars so devastating or at least having the potential to be, so what exactly is a trade war?

When countries agree on trading between one another it is usual for them both to agree on what export and import charges will be made by each other, on each other’s products or materials. This will often afford each country’s goods preferential pricing compared to other countries goods thereby improving each of the countries sales of manufactured goods or raw materials. If there is no agreement between each country then each country can charge whatever taxes they like on the others goods. Although this will usually mean one country’s products will receive the same taxation as any other countries, allowing them equal opportunity to compete, a trade war can potentially start when one country applies extra taxes to another’s alone, making that country’s products more expensive than similar products imported from elsewhere. If a country who has had extra charges levied against their products responds in kind to the country also making extra levies, a trade war begins.

When one country is involved in a trade war with another, it is hard for either country to sell their products in the others and overall trade and businesses in both countries can suffer for this. This is the case with the latest trade war which is taking place between the United States and China. This trade war was started when president Trump placed an additional 25% tax on aluminum imported from China. Although the pretense was to secure metal and aluminum miners jobs in the US, it gravely hurt car manufacturers in the States who are highly dependent on China’s aluminum. In response to this action, China applied extra taxation to items imported from the US and a trade war began.

Once started though, it is difficult to contain a trade war to just the two countries which started it and this has been shown by American car makers having to add the extra cost of aluminum onto the cost of their end product to other countries. This in many cases goes against trade deals already made between those countries and the US and so another potential trade war emerges.

In the end trade wars are bad for most people and the reason for that is that manufacturers and importers will always pass any extra costs onto the retailers and eventually the general public and it is therefore the general public which bears the cost of the war. This knock on effect occurs in any country which is involved in a trade war and so although people may think only governments and businesses are doing battle, all of us are casualties of those battles.