A trade war refers to two or more states raising or creating tariffs or other trade barriers on each other in retaliation for other trade barriers. Increased protection causes both nations' output compositions to move towards their autarky position.
Some economists would agree that certain economic protections are more costly than others, because they may be more likely to trigger a trade war. For example, if a country were to raise tariffs, then a second country in retaliation may similarly raise tariffs. But an increase in, for example, subsidies, may be difficult to retaliate against by a foreign country. Many poor countries do not have the ability to raise subsidies. In addition, poor countries are more vulnerable than rich countries in trade wars; in raising protections against dumping of cheap products, a government risks making the product too expensive for its people to afford.
Famous quotes containing the words trade and/or war:
“Is there something in trade that dessicates and flattens out, that turns men into dried leaves at the age of forty? Certainly there is. It is not due to trade but to intensity of self- seeking, combined with narrowness of occupation.... Business has destroyed the very knowledge in us of all other natural forces except business.”
—John Jay Chapman (1862–1933)
“... the ... radio station played a Chopin polonaise. On all the following days news bulletins were prefaced by Chopin—preludes, etudes, waltzes, mazurkas. The war became for me a victory, known in advance, Chopin over Hitler.”
—Margaret Anderson (1886–1973)