A trade war escalates tensions, disrupts economies, and can have broad-reaching consequences such as recessions and supply chain disruptions. It can also erode trust among nations and even prompt military responses in extreme cases.
During the trade war, nations will typically impose tariffs and other trade barriers on one another. They may also threaten to retaliate against each other. This creates artificial scarcity, which causes prices to rise and forces consumers to favor local products or rely on imports from other countries. This can reduce economic growth in both nations.
The United States and China have already imposed tariffs on each other’s goods. They have both threatened to increase those tariffs. Moreover, they have retaliated against each other’s companies and citizens. This has led some businesses, including electric car manufacturers and semiconductor firms, to shift production out of the US to countries like Vietnam and Cambodia. This is known as “deglobalization” and is often driven by the need to lower manufacturing costs, a desire to protect trade secrets, or national security concerns.
The Trump administration has imposed tariffs on Chinese goods and retaliated with its own levies. These new restrictions on imports from China could cause the price of consumer electronics, such as smartphones and computers, to rise. They could also make it more expensive to build homes and other types of structures that rely on imported supplies. In addition, it will likely cost more to transport these goods to consumers.