A trade war is an economic conflict resulting from extreme protectionism in which states raise or create tariffs or other trade barriers against each other in response to trade barriers created by the other party. If tariffs are the exclusive mechanism, then such conflicts are known as customs wars, toll wars, or tariff wars; as a reprisal, the latter state may also increase the tariffs. Increased protection causes both nations' output compositions to move towards their autarky position.
Trade wars could be escalated to full conflict between states, as evidenced in the Massacre of the Bandanese after alleged violations of a new treaty. The First Anglo-Dutch War caused by disputes over trade, the war began with English attacks on Dutch merchant shipping, but expanded to vast fleet actions. The Second Anglo-Dutch War for control over the seas and trade routes, where England tried to end the Dutch domination of world trade during a period of intense European commercial rivalry. The Fourth Anglo-Dutch War over British and Dutch disagreements on the legality and conduct of Dutch trade with Britain's enemies in that war. The Shimonoseki Campaign after unrest over the shogunate's open-door policy to foreign trade. The First Opium War which started after the Qing government blockaded its ports, confiscated opium contraband and confined British traders, resulted in the dispatch of the British Navy to China and engage the Chinese Navy in the Battle of Kowloon. The First Opium War eventually led to the British colony of Hong Kong, and the Second Opium War, which arose from another trade war with the same underlying causes, expanded the British possessions on the island.
One example of a modern tariff war is the ongoing China – United States trade war. In January 2018, U.S. President Donald Trump began setting tariffs and other trade barriers on China with the goal of forcing it to make changes to what the U.S. says are "unfair trade practices" and intellectual property theft. The Trump administration stated that these practices may contribute to the U.S.–China trade deficit, and that the Chinese government requires transfer of American technology to China. In response to US trade measures, the Chinese government accused the Trump administration of engaging in nationalist protectionism and took retaliatory action. After the trade war escalated through 2019, in January 2020 the two sides reached a tense phase one agreement; it expired in December 2021 with China failing by a wide margin to purchase American goods and services as agreed. By the end of the Trump presidency, the trade war was widely characterized as a failure.
Since the 1980s, Trump had advocated tariffs to eliminate the U.S. trade deficit and promote domestic manufacturing, saying the country was being "ripped off" by its trading partners; imposing tariffs became a major plank of his presidential campaign. Most economists do not believe trade deficits pose a significant problem for the American economy and would do more harm than good to the American economy, and some advocated alternate means to address trade deficits with China.
The trade war negatively impacted the economies of both countries. In the United States, it has led to higher costs for manufacturers, higher prices for consumers and financial difficulties for farmers. In China, the trade war contributed to a slowdown in the rate of economic and industrial output growth, which had already been declining. Many American companies have shifted supply chains to elsewhere in Asia, bringing fears that the trade war would lead to a US-China economic 'decoupling'. The trade war has also caused economic damage in other countries, though some benefited from increased manufacturing as production was shifted to them. It also led to stock market instability. Governments around the world have taken steps to address some of the damage caused by the economic conflict.
While there has been broad support for the Trump administration's objective of making China change its trade policies, the use of tariffs and the trade war's negative economic impact have been widely criticized. Among American industries, U.S. businesses and agricultural industries have opposed the trade war, though most farmers continued to support Trump, who provided them with substantial financial support. As the Biden administration began in January 2021, Biden was evaluating the tariffs and pursuing a multilateral approach with allies to confront China.
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