Trade War

AAA

DEFINITION of 'Trade War'

A negative side effect of protectionism that occurs when Country A raises tariffs on Country B's imports in retaliation for Country B raising tarrifs on Country A's imports. Trade wars may be instigated when one country perceives another country's trading practices to be unfair or when domestic trade unions pressure politicians to make imported goods less attractive to consumers. Trade wars are also a result of a misunderstanding of the widespread benefits of free trade.

INVESTOPEDIA EXPLAINS 'Trade War'

A trade war that begins in one sector can grow to affect other sectors. Likewise, a trade war that begins between two countries can affect other countries not initially involved in the trade war. A trade war can be distinguished from other actions that have a detrimental effect on the trading relationship between two countries in that its goals are related specifically to trade (whereas sanctions, for example, also negatively affect free trade, but may have humanitarian or war-related goals).

RELATED TERMS
  1. Tariff

    A tax imposed on imported goods and services. Tariffs are used ...
  2. Fair Trade Price

    A minimum price paid for certain agricultural products imported ...
  3. Bidding War

    A situation where two or more buyers are so interested in an ...
  4. Quota

    A government-imposed trade restriction that limits the number, ...
  5. Trade

    A basic economic concept that involves multiple parties participating ...
  6. Protectionism

    Government actions and policies that restrict or restrain international ...
Related Articles
  1. Personal Finance

    What Is International Trade?

  2. Economics

    Globalization: Progress Or Profiteering?

  3. Economics

    The Basics Of Tariffs And Trade Barriers

  4. Economics

    What Is The World Trade Organization?

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center