GLOBAL TRADE RELATIONS: The impact of trade wars on the individual

Amir Bereket

What does a trade war mean?

A trade war is a conflict of an economic nature between two or more nations with the aim of protecting domestic industries, reducing trade deficits, and gaining a competitive advantage in international trade. For instance, a government could implement trade barriers by raising tariffs and other restrictive measures.

Why is it crucial for the world, especially for your country?

To begin with, it has a huge impact on the economy for several reasons:

First of all, it has a significant effect on the country’s economy. Trade barriers, which limit the flow of goods and services into a country, lead to the rise in inflation and potential job losses. Moreover, there is a possibility that neighboring countries could face losses, although this does not occur every time.

In addition, trade wars could potentially lead to an economic crash.

The majority of countries have some essentials for appropriate development, so a shortage of supply increases the possibility of an economic collapse.

When a nation is limited in its access to supplements, it eventually weakens the national economy. A vivid illustration of this is the Arab world, which restricted the shipment of oil to the U.S., causing a rise in oil prices and slowing down the growth of the economy.

Pros and Cons

Pros: | Cons:

Protection of domestic products | 1. Higher prices for consumers
Reducing trade deficits | 2. Economic slowdown
Job preservation | 3. Supply chain disruptions

Example (US and China)

In 2016, during the election of Donald Trump, he announced that most of the manufacturing forces would be returned to the US from other nations like China. In 2018, Donald Trump initiated his previous idea by threatening significant fines over alleged intellectual property (IP) theft and significant tariffs. Similarly, China took counteractions against the US by announcing a raising of the tax rate to 25% on more than 150 US products.

Throughout 2018, the rivalry for manufacturing has sharpened with increases in tariffs and taxes. Although China responded with their own, it had a substantial effect on China’s economy and the manufacturing sector, slowing it down. At the end of December 2018, it seemed that they were coming to an agreement to cease fire. This continued until the spring of 2019 when suddenly China's diplomats changed their mind. As expected, the President of the US was upset that the number of obligations on imports had increased dramatically.

Conclusions

A trade war is mostly utilized for the good of one's own country, trying to avoid harming other countries. It should not be misunderstood as sanctions. It is rare to see trade wars in modern days because of economic and trading unions.