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:
“Whatever trade one is in, one will find some fault with it.”
—Chinese proverb.
“Against war one might say that it makes the victor stupid and the vanquished malicious. In its favor, that in producing these two effects it barbarizes, and so makes the combatants more natural. For culture it is a sleep or a wintertime, and man emerges from it stronger for good and for evil.”
—Friedrich Nietzsche (1844–1900)