Explore trade wars, their impact, the U.S.-China conflict, and historical examples. A must-read for UPSC, SSC & Banking aspirants. Stay updated with Atharva Examwise.
What Is a Trade War?
A trade war is an economic conflict where countries retaliate against each other’s unfair trade practices by imposing tariffs or other trade barriers. These wars usually arise when one country believes that another is exploiting its markets or violating international trade norms.
🔍 Example:
In 2024, the U.S. raised tariffs on Chinese electric vehicles to 100%, which triggered fears of a full-blown trade war.
Understanding Trade Wars and Protectionism
Trade wars are often a byproduct of protectionism, where governments restrict international trade to safeguard local industries.
Key Concepts:
Trade Deficit: When a country's imports exceed its exports.
Tariff: A tax on imports aimed at discouraging foreign goods.
Such policies may help in reducing trade deficits, but they often lead to higher prices and reduced global cooperation.
Trade War vs Other Protectionist Tools
| Action | Description |
|---|---|
| Tariffs | Taxes on imports (core tool in trade wars) |
| Sanctions | Broader, often with political or humanitarian motives |
| Import Quotas | Limiting the volume of imported goods |
| Subsidies | Financial aid to local industries to discourage outsourcing |
A Brief History of Major Trade Wars
📜 17th–19th Century:
Colonial Trade Battles – European powers fought over monopoly trade rights.
Opium Wars – British forced China to allow opium and other trade in the 1800s.
🏛️ Smoot-Hawley Tariff Act (1930):
Raised U.S. tariffs to nearly 40%.
Sparked global retaliation, worsening the Great Depression.
🇺🇸 U.S.–China Trade War (2018–2025):
2018: Trump imposes tariffs on steel, solar panels, and Chinese goods.
2019: China retaliates with tariffs on U.S. agricultural products.
2020: Temporary deal signed but tensions persist.
2024–2025: Biden raises EV and semiconductor tariffs; China threatens further retaliation.
Advantages and Disadvantages of Trade Wars
✅ Pros:
Protects domestic industries from unfair competition.
Boosts local job growth and demand.
Can address unethical trade practices of other nations.
Helps reduce trade deficits.
❌ Cons:
Raises consumer prices → inflation.
Causes shortages if no local alternatives.
Hurts exports due to retaliatory tariffs.
Slows economic growth and strains diplomatic ties.
U.S.–China Trade War: A Closer Look
🔹 2018:
Tariffs imposed on $34 billion of Chinese goods.
China retaliates with tariffs on pork, soybeans, etc.
🔹 2019:
Negotiations break down; U.S. increases tariffs to 25% on $200 billion goods.
🔹 2020:
Partial trade agreement signed.
🔹 2024:
Biden raises tariffs to:
100% on electric vehicles
50% on semiconductors & solar cells
25% on lithium-ion batteries
Key Takeaways for Competitive Exams
✅ Trade war = series of retaliatory tariffs
✅ U.S.–China trade war started in 2018 and is ongoing
✅ Tariffs = import tax, meant to protect domestic producers
✅ Can cause price hikes, inflation, and global economic slowdown
✅ Smoot-Hawley Tariff (1930) worsened the Great Depression
✅ Biden's 2024 tariff hike reignited global trade tensions
Why This Matters for Exams
This topic connects with:
UPSC GS Paper 3 – International Trade, Economy, Global Relations
SSC/BANKING General Awareness – Current global affairs, economic policies
Essay & Interview Topics – Globalization vs Protectionism, U.S.–China Relations
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