Trade War


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.


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).

  1. Tariff

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  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. Trade

    A basic economic concept that involves multiple parties participating ...
  5. Quota

    A government-imposed trade restriction that limits the number, ...
  6. Protectionism

    Government actions and policies that restrict or restrain international ...
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