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.

RELATED TERMS
  1. Tariff

    A tax imposed on imported goods and services. Tariffs are used ...
  2. Multiple Column Tariff

    A tariff system where the tariff rate or import tax assessed ...
  3. Trade War

    A negative side effect of protectionism that occurs when Country ...
  4. Smoot-Hawley Tariff Act

    U.S. law enacted in June 1930 which caused an increase in import ...
  5. Commercial Policy

    The regulations and policies that determine how a country conducts ...
  6. Environmental Tariff

    A tax placed on products being imported to or exported from countries ...
Related Articles
  1. Insights

    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.
  2. Investing

    Tariffs

    Tariffs, or customs duties, are taxes imposed on foreign goods and services. In addition to providing a country with additional revenue, tariffs offer protection to domestic producers. Imported ...
  3. Investing

    Growth and Politics In Exports

    An export is a good or service that is shipped from one country to another for sale or trade.
  4. Insights

    Trump's Tariffs Could Result in a Spending Increase of $2,200 for Consumers

    A new study states that Trump's proposed tariffs could result in a significant increase for consumer spending.
  5. Investing

    General Agreement on Tariffs and Trade (GATT)

    The General Agreement on Tariffs and Trade was a treaty created after World War II that regulated world trade in an effort to aide economic recovery.
  6. Investing

    Trans Pacific Partnership: 4 Companies to Watch (TSN, CAG)

    Find out which U.S. companies stand to benefit from the Trans Pacific Partnership (TPP) signed between the United States and 11 other countries.
  7. Investing

    Explaining Economic Integration

    Economic integration reduces or eliminates trade barriers among nations, and coordinates monetary and fiscal policies.
  8. Insights

    The Balance Of Trade

    The balance of trade is the difference between a country’s imports and exports. A trade deficit occurs when a country buys or imports more goods from other countries than it sells or exports. ...
  9. Insights

    Brexit Will Make Cars and Wine More Expensive For Brits

    European Union import tariffs will make cars and wine become more expensive for British consumers.
RELATED FAQS
  1. Which countries have the highest tariffs?

    Find out which countries have the most restrictive import tariffs on international products as ranked from data collected ... Read Answer >>
  2. How do tariffs protect domestic industries?

    Understand the four ways tariffs are used by domestic government to protect its domestic industries. Learn how tariffs are ... Read Answer >>
  3. What are common reasons for governments to implement tariffs?

    Gain a basic understanding of a government-sanctioned import tariff, what it is meant to accomplish and common reasons for ... Read Answer >>
  4. How can tariffs cause inefficiencies in domestic industries?

    Understand what a tariff is and why a government would want to impose a tariff. Learn how tariffs can contribute to domestic ... Read Answer >>
  5. How does Federal Trade Commission use the Herfindahl-Hirschman Index to evaluate ...

    Understand specific examples of domestic products that rely on protective tariffs to survive. Learn about the varying tariff ... Read Answer >>
  6. If left in place long term, what problems does protectionism cause for a country?

    Discover the problems caused by international trade protectionism and why economists support free trade, and review the infamous ... Read Answer >>
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center