A trade war occurs when two nations impose restrictions on each other’s trade. These trade barriers can halt production, lower economic output and raise prices for consumers. They also increase tension between nations, creating an environment for political crises and potential conflict.
In recent years, the US-China trade war has become the most significant trade conflict in decades. Despite the US-China trade war’s high costs for American companies, consumers and workers, neither country has emerged as a clear winner. In addition, the conflict’s effects on global growth are likely to be substantial and lasting.
While trade wars can be caused by a variety of reasons, the Trump administration’s motivations for imposing tariffs on China are particularly concerning. These include a desire to reduce America’s trade deficit with China; the need to limit access of Chinese companies to technology that can compete with them in e-commerce and mobile services; and the need to prevent China from developing a domestic economy that threatens high wage jobs in US manufacturing and other sectors.
While world leaders may be tempted to cave to Trump’s coercive threats and retaliate with counter-tariffs of their own, they should instead focus on pushing for multilateral negotiations and compliance with international trade rules. After all, the deep unpopularity of President Trump provides world leaders with a politically useful foil—as evidenced by the rising popularity of British Prime Minister Keir Starmer and French President Emmanuel Macron.