When governments put tariffs on imported goods, the prices of those goods go up and make foreign products less competitive. Sometimes, governments do this to protect domestic industries that are in trouble or to address national security concerns. But the economic costs can be far-reaching and even debilitating.
The trade war between the United States and China is one of the most significant global economic conflicts in recent history. Launched in 2018 during President Trump’s first term, it began when his administration imposed tariffs on Chinese goods and Beijing responded in kind. As a result, the dispute has evolved into a structured tit-for-tat exchange of tariff increases and nontariff barriers like export bans, antitrust probes, and investment restrictions.
In general, when a country engages in a trade war, its overall economy suffers. But the impacts are felt more acutely in specific sectors, regions, and households that depend on imports for essential goods or services. This is because, unlike money, most goods aren’t as fungible or easily substituted for. So when a country’s trading partners have to pay more for raw materials, the cost of manufacturing goes up and can eventually lead to inflation.
The US-China trade war is a reminder that, while international initiatives such as the World Trade Organization aim to reduce friction and promote stability, every nation must act in its own best interest. Putting tariffs on certain imports may boost domestic economies, but that benefit can be offset by the higher price of foreign goods and the disruption to supply chains.
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