As the US and China continue to slap tariffs on each other, it’s important to remember that tariffs aren’t the only tools countries use to protect their economic interests. Other barriers include quotas on imports, subsidies to support domestic industries, and regulations to block foreign competition. They may be less visible than tariffs but can add up and inflame tensions.
As trade tensions rise, the global economy could be hit by rising costs and disruptions. That’s why it’s so important to understand what a trade war is and how it will impact different economies around the world.
During his campaign, President Trump criticized many current trade agreements and promised to bring jobs back to America. His actions since he took office have been largely driven by his desire to reduce the United States’ dependence on foreign goods and to encourage domestic production. This shift is commonly referred to as deglobalisation.
While it’s true that increased nationalism can lead to higher support for protectionist policies, there are also other factors driving the trend. Many voters believe that the benefits of globalisation haven’t filtered down to them, and they’re calling for their national needs to be put first.
The economic damage of a trade war depends on a country’s level of dependency on foreign products and its own capacity to produce the goods it wants or needs. A trade war can place increasing financial strain on multiple sectors and escalate until one or both sides back down.
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