TRADE WAR PRIMER

What is a trade war?

It’s “an economic conflict in which countries impose import restrictions on each other in order to harm each other’s trade.”

What happened in previous trade wars?

One of the examples is the 1930’s SmootHawley Act, which hiked US tariffs by around 20%, to protect American farmers. It then broadened after other industries lobbyied for protections.

Who wins in a trade war?

No one, if history is any guide. For example, when President George W Bush raised steel tariffs in 2002, US gross domestic product declined by $30.4 million, according to the US International Trade Commission.

Whydid Trump invite this fight?

In a recent Twitter post, he declared trade wars “good, and easy to win.” His focus remains reducing the trade deficit, which shows the US imports hundreds of billions of dollars more than it exports

Can tariffs backfire on the US?

Yes, for example, tariffs. Many more people are employed in industries, such as auto manufacturing, that buy steel to make products, than in steel-making itself. Some consumers may also have to pay higher prices. Trade tensions could boost inflation more than desired by Federal Reserve policy makers, who might feel the need to raise rates more aggressively than planned.