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:
“The most conservative man in the world is the British Trade Unionist when you want to change him.”
—Ernest Bevin (1881–1951)
“Catholics are necessarily at war with this age. That we are not more conscious of the fact, that we so often endeavour to make an impossible peace with it—that is the tragedy. You cannot serve God and Mammon.”
—Eric Gill (1882–1940)