Tariff War

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".

BREAKING DOWN '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.

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