When countries try to protect their own industries through taxes and quotas, it can lead to trade war. The resulting conflict disrupts global markets, raises consumer prices and can strain international cooperation.
US President Donald Trump has shaken up the world’s largest economies with his protectionism agenda, slapping steep tariffs on imported goods from China and other nations in a retaliatory “tit-for-tat” escalation. He has also threatened to pull the United States out of the World Trade Organization, an impartial international body that regulates and arbitrates trade among its member states.
But trade battles are not a new phenomenon. They’ve been going on as long as nations have traded with each other, from the corn laws of Britain that protected domestic farmers but caused widespread hardship to the opium wars between Britain and China in the 19th century.
Despite a recent surge in protectionist sentiment, history suggests that a global trade war would be bad for everyone. Countries’ economies could suffer due to lower consumer spending as imports become more expensive, and companies relying on exports may face decreased demand and job cuts. Developing countries are often disproportionately affected, as they tend to depend more heavily on exports for economic growth.
In the short term, skilled workers in exporting sectors lose more than those in import-competing industries, while unskilled workers see little or no loss of employment. The trade war thus harms middle-class and working class households, including some that voted for the president, and can reduce overall consumption in the economy.