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 FAQS
  1. How does the neoclassical growth theory predict real GDP?

    Neoclassical growth theory predicts real gross domestic product (GDP) through measures of total factor productivity, capital, ... Read Full Answer >>
  2. What are common concepts and techniques of managerial accounting?

    The common concepts and techniques of managerial accounting are all the concepts and techniques that surround planning and ... Read Full Answer >>
  3. What is the government's role and what is the private sector's role in neoliberalism?

    Neoliberalist economic theory supports minimization of government intervention and laissez-faire policy. Neoliberalism is ... Read Full Answer >>
  4. What do banks do to control the bank reserve?

    While all banks are required to maintain a specific amount of bank reserves, the banks themselves do not control the minimum ... Read Full Answer >>
  5. How is abatement cost accounted for on financial statements?

    Abatement costs are accounted for on a company's financial statements through increases in either cost of goods sold or operational ... Read Full Answer >>
  6. What are the components of a financial account?

    The components of a country's financial account are its domestic ownership of foreign assets and the foreign ownership of ... Read Full Answer >>
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. Economics

    Understanding Limited Liability

    Limited liability is a legal concept that protects equity owners from personal losses due to their ownership interest in the company.
  8. Economics

    Calculating Income Elasticity of Demand

    Income elasticity of demand is a measure of how consumer demand changes when income changes.
  9. Economics

    Understanding Implicit Costs

    An implicit cost is any cost associated with not taking a certain action.
  10. Fundamental Analysis

    Explaining the Empirical Rule

    The empirical rule provides a quick estimate of the spread of data in a normal statistical distribution.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!