Tariff War

AAA

DEFINITION of 'Tariff War'

An economic battle between two countries in which Country A raises tax rates on Country B's exports, and Country B then raises taxes on Country A's exports in retaliation. The increased tax rate is designed to hurt the other country economically, since tariffs discourage people from buying products from outside sources by raising the total cost on those products.


One reason why a country might incite a tariff war is because it is unhappy with one of its trading partners' political decisions. It hopes that by putting enough economic pressure on the country, it can force a change in the opposing government's behavior. This type of tariff war is also known as a "customs war".

INVESTOPEDIA EXPLAINS 'Tariff War'

A tariff war can also be another name for a price war, or the continuous lowering of prices by two or more companies who are competing to gain market share. This definition is based on the secondary meaning of the word "tariff", which can mean price, especially when referring to public utilities. For example, in mid to late 2009, Indian telecom companies including Bharti Airtel, Tata DoCoMo, Reliance Communications, Idea Cellular and others engaged in a tariff war, undercutting each other's per-minute billing charges for cell phone use.

RELATED TERMS
  1. Free Trade Area

    A group of countries that invoke little or no price control in ...
  2. Balanced Trade

    A condition in which an economy runs neither a trade surplus ...
  3. Multiple Column Tariff

    A tariff system where the tariff rate or import tax assessed ...
  4. Anti-Dumping Duty

    A protectionist tariff that a domestic government imposes on ...
  5. Price War

    When companies continuously lower prices to undercut the competition. ...
  6. Import Duty

    A tax collected on imports and some exports by the customs authorities ...
Related Articles
  1. Economics

    Can The IMF Solve Global Economic Problems?

    The IMF is an important tool to help struggling countries, but it's not without its problems.
  2. Fundamental Analysis

    How Globalization Affects Developed Countries

    The increase in communications technology has companies competing in a global market.
  3. Personal Finance

    What Is International Trade?

    Everyone's talking about globalization, so we explain what is it and why some oppose it.
  4. Economics

    Globalization: Progress Or Profiteering?

    Proponents of globalization argue that it helps the economies of developing nations and makes goods cheaper, while critics say that globalization reduces domestic jobs and exploits foreign workers. ...
  5. Economics

    The Basics Of Tariffs And Trade Barriers

    Everything you need to know - from the different types of tariffs to their effects on the local economy.
  6. Economics

    What Is The World Trade Organization?

    The WTO sets the global rules of trade. But what exactly does it do and why do so many oppose it?
  7. Investing

    Can Europe’s QE Be A Stimulus For U.S. Investors?

    Finding value in today’s markets has been difficult, so many investors are turning to opportunities outside of the U.S. But where should they look?
  8. Economics

    Benefits From A Tango Of China-US Trade and Debt

    China has been accumulating US debt for many decades. Here's why it continues to do so, and the risks and benefits of this for both the US and China.
  9. Economics

    10 Countries With The Biggest Forex Reserves

    Without adequate reserves, a nation's economy can grind to a halt. Here are the 10 nations with the biggest forex reserves.
  10. Economics

    What Is The Labor Market Conundrum?

    We are facing a conundrum with investment implications: Why are wages still stagnant, when jobs are being created at the fastest pace since the late 90's?

You May Also Like

Hot Definitions
  1. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  2. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  3. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  5. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  6. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
Trading Center