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 War

    An economic battle between two countries in which Country A raises ...
  2. War Damage Insurance Corporation

    A government financial protection arm created during World War ...
  3. Balanced Trade

    A condition in which an economy runs neither a trade surplus ...
  4. Terms of Trade - TOT

    Terms of trade (TOT) are the ratio between a country's export ...
  5. War Economy

    The organization of a country's production capacity and distribution ...
  6. China Currency Bill

    A potential law passed in September 2011 by the U.S. Senate that ...
Related Articles
  1. Investing

    Charles Schwab: Trade Issues to Create Bouts of Market Volatility

    Charles Schwab said that the tariffs proposed by President Trump will create bouts of volatility.
  2. Investing

    War's Influence On Wall Street

    Blitzkrieg? Dawn raids? Sounds like the markets and the battlefield have a few things in common.
  3. Managing Wealth

    Evaluating country risk for international investing

    Investing overseas begins with determining the risk of the country's investment climate.
  4. Investing

    What Is A Currency War And How Does It Work?

    We look at what a currency war is, what factors may lead to it, the impacts of such a strategy, and whether there is a currency war currently.
  5. Investing

    Economic Conditions That Helped Cause World War II

    Dire economic conditions following the First World War intensified antagonisms between nations that would eventually lead to the outbreak of World War II.
  6. Investing

    Investing During Uncertainty

    The inability to forecast future events can turn the markets upside down. Find out how to stay right-side up.
  7. Insights

    The Risks if Trump Starts a Trade War With China

    If Trump follows through with his campaign trade promises, he may start a trade war with China.
  8. Investing

    Online Broker Price Wars Will Slash Earnings

    Price wars will provide online brokers with little benefit.
  9. Personal Finance

    Economic Effects Of Life After Military Service

    The end of operations in Iraq and Afghanistan will have an impact on the economy. Discover how.
  10. Insights

    Can The IMF Solve Global Economic Problems?

    The IMF is an important tool to help struggling countries, but it's not without its problems.
  1. What are key benefits to a country that has engaged in a policy of currency depreciation?

    Learn about key benefits to a country engaging in a policy of currency depreciation, such as smaller trade deficits, employment ... Read Answer >>
  2. What does "buy on the cannons, sell on the trumpets" mean?

    All the events and news that happen around the world can have a great impact on the stock market. Very often, if a war breaks ... Read Answer >>
  3. How does a capital account illustrate the strength of investment markets for a country?

    Understand what a country's capital account is and how the capital account level can be used to gauge the strength of investment ... Read Answer >>
  4. What was the Marshall Plan?

    The Marshall Plan was a U.S.-sponsored program implemented following the second world war to aid European countries that ... Read Answer >>
  5. What does a negative balance in the capital account mean?

    Understand what a country's capital account represents and the significance of a negative, or deficit, balance in the capital ... Read Answer >>
Hot Definitions
  1. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  2. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  3. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  4. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  5. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  6. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
Trading Center