The Balance Trade Wars and their Effect on the Economy and You (BUTTON) Menu (BUTTON) Search ____________________ (BUTTON) Go -- -- US Economy and News Trade Policy Trade Wars and their Effect on the Economy and You -- Why Trade Wars Are Bad and Nobody Wins * Share -- -- Updated December 07, 2019 A trade war is when a nation imposes tariffs or quotas on imports and foreign countries retaliate with similar forms of trade protectionism. -- foreign countries retaliate with similar forms of trade protectionism. As it escalates, a trade war reduces international trade. -- A trade war starts when a nation attempts to protect its domestic industry and create jobs. In the short run, it may work. Tariffs are supposed to give a competitive advantage to domestic producers of that -- -- grow, they would add jobs. But in the long run, a trade war costs jobs. It depresses economic growth for all countries involved. It also triggers inflation when tariffs increase the prices of imports. -- -- tariffs increase the prices of imports. The 1930 Smoot-Hawley Tariff was a trade war that worsened the Great Depression. It increased 900 import tariffs by an average of 40% to 48%. -- -- by the Dust Bowl. But it also raised food prices for Americans who were already suffering from the Great Depression. Other countries retaliated with their own tariffs. The trade war reduced international trade by 65%. It turned a recession into a depression and contributed to the start of World War II. -- -- start of World War II. Trump's Trade Wars President Donald Trump wants to reduce the $621 billion U.S. trade -- -- added another $214 billion to the trade deficit. In early 2018, Trump said, "Trade wars are good and easy to win." He has initiated three: a global tariff on steel, a tariff on European autos, and tariffs on Chinese imports. After Trump’s announcement, -- -- has initiated three: a global tariff on steel, a tariff on European autos, and tariffs on Chinese imports. After Trump’s announcement, global stock markets tumbled in fear of a trade war between the world's three largest economies. In late 2018, several U.S. companies formed "Tariffs Hurt the Heartland.” They are hurt by the rising costs of -- -- lost economic growth. In August 2019, Goldman Sachs warned that the trade war could spark a recession. It's already lowered gross domestic product by 0.6%. -- -- action. U.S. - China Trade War Major Events Timeline By far, the largest U.S. trade deficit by country is with China. In -- -- moved to March 1, then dropped. Causes of U.S. Trade War with China -- U.S. politicians have long threatened a trade war with America's largest trading partner in goods. A trade deficit occurs when exports are less than imports. -- -- in America." Trade War With the EU On March 7, 2018, the EU threatened a 25% tariff on U.S. exports such -- -- import more U.S. liquefied natural gas and soybeans. That would reduce its reliance on Russian LNG and help out American farmers who have lost the Chinese market due to the trade war. But Russia's LNG price is much lower than America's, so it's unlikely any big changes will be made there. -- -- How It Affects You The trade war has raised the prices of consumer goods that use steel and aluminum. Soda and beer suppliers were the first to raise prices. Costs have increased on imported clothes hangers, heavy-equipment -- -- go out of business. In the long term, trade wars slow economic growth. They create more layoffs, not fewer, as foreign countries retaliate. The 12 million U.S. workers who owe their jobs to exports could get laid off. -- -- workers who owe their jobs to exports could get laid off. Consultant Oxford Economics predicted the trade war could cost the global economy $800 billion in reduced trade. That could slow growth by 0.4%. It's occurring at the same time that oil prices and interest -- -- rates are rising. Over time, trade wars weaken the protected domestic industry. Without foreign competition, companies within the industry don't need to innovate. Eventually, the local product would decline in quality -- -- The Bottom Line A trade war may improve a nation’s trade deficit in the short run but it could cost warring nations their economic growth in the long term. -- it could cost warring nations their economic growth in the long term. The United States is currently engaged in a trade war with China, the EU, Mexico, and Canada. Because of this, the affected countries have signed new trade agreements with other countries and have left America -- -- of agricultural products, bourbon, cheese, and auto parts are suffering as foreign markets disappear under retaliatory tariffs. Trump must resolve the trade war soon before it wreaks serious damage on the U.S. economy. Article Table of Contents Skip to section -- -- Article Table of Contents Skip to section (BUTTON) Expand * Trump's Trade Wars * Trade War Major Events Timeline * Causes of U.S. Trade War with China * Trade War With the EU * How It Affects You * The Bottom Line -- -- Article Sources 1. CNBC. "Trump Doubles Down: Trade Wars Are Good, and Easy to Win," Accessed Dec. 6, 2019. 2. The Wall Street Journal. "U.S. Businesses Ramp Up Lobbying Against -- -- 2019. 4. The National Bureau of Economic Research. "The Impact of the 2018 Trade War on U.S. Prices and Welfare." Accessed Dec. 6, 2019. 5. NBCNews. "Trump's Trade War Could Spark a Recession, Goldman Sachs Warns," Accessed Dec. 6, 2019. 6. The Wall Street Journal. "This One Here Is Gonna Kick My Butt—Farm -- -- 6. The Wall Street Journal. "This One Here Is Gonna Kick My Butt—Farm Belt Bankruptcies Are Soaring," Accessed Dec. 6, 2019. 7. Bloomberg. "U.S. Farmer Income Drops Most Since 2016 as Trade War Losses Mount," Accessed Dec. 6, 2019. 8. The Wall Street Journal. "Trump Administration Rolls Out $16 -- -- Accessed Dec. 6, 2019. 50. The Washington Post. "White House Readies Plan for $12 Billion in Emergency Aid to Farmers Caught in Trump’s Escalating Trade War," Accessed Dec. 6, 2019. 51. The Wall Street Journal. "U.S. to Pay Farmers $4.7 Billion to -- -- Dec. 6, 2019. 55. The Washington Post. "The Finance 202: The Stock Market is Shrugging Off Trump's Trade War. That May Not Last," Accessed Dec. 6, 2019. 56. The Wall Street Journal. "Tariff Dispute Threatens China’s Thirst -- -- for U.S. Oil," Accessed Dec. 6, 2019. 57. Business Insider. "ROUND 2: US, China Announce Newest Round of Tariffs as Trump's Trade War Shows No Sign of Slowing Down," Accessed Dec. 6, 2019. 58. Office of the United States Trade Representative. "USTR Finalizes -- -- - September 17, 2018," Accessed Dec. 6, 2019. 60. The New York Times. "Trump Hits China With Tariffs on $200 Billion in Goods, Escalating Trade War," Accessed Dec. 6, 2019. 61. Bloomberg. "U.S. Plans More China Tariffs If Trump-Xi Meeting Fails, Sources Say," Accessed Dec. 6, 2019. -- -- 84. The Wall Street Journal. "Soda, Motorcycle Prices Rise as Tariffs Hit Home for Consumers," Accessed Dec. 6, 2019. 85. Politico. "How the Trade War Hits Home," Accessed Dec. 6, 2019. 86. The Washington Post. The First Layoffs From Trump’s Tariffs Are Here," Accessed Dec. 6, 2019. -- -- Dec. 7, 2019. 88. McClatchy Washington Bureau. "California Dairy Farmers, Part of Trump’s Base, Stand to Get Creamed by His Trade War," Accessed Dec. 7, 2019. -- 7, 2019. 89. The New York Times. "How the ‘Biggest Trade War in Economic History’ Is Playing Out," Accessed Dec. 7, 2019. CNBC. "Whiskey Wars: Trade Tariffs Hit Hard in Trump Country." -- -- 94. Reuters. "Trump Metals Tariffs Will Cost Ford $1 Billion in Profits, CEO Says," Accessed Dec. 7, 2019. 95. Business Insider. "Trump's Trade War Could Destroy 4% of Global Trade: The Threat to World Growth is Significant," Accessed Dec. 7, 2019.