Trade wars have had a negative impact on the development of many nations’ economies. Countries can no longer achieve their intended economic development since they are involved in trade wars with their neighbours or other nations of the world. A trade war occurs when a nation decides to impose tariffs or quotas on imports. Foreign countries opt to respond by imposing the same trade sanctions on that particular country. As the trade war gains momentum, it ends up reducing international trade.
Most trade wars start when a country tries to protect its domestic industry while at the same time creating employment. This action tends to work in the short run since the local industries will be able to sell their products without facing competition from overseas companies. As more companies join the industry, they end up creating employment to the citizens of that particular country.
By imposing tariffs, a government is able to give a competitive advantage to domestic producers who also happen to have the same products. As a result, they end up receiving more customers since their prices are quite low when compared to the overseas producers.
As their businesses continues to grow, they start searching for more employees thus creating employment.Unfortunately, a trade war has a negative effect on the economy in the long run. Actually, it depresses the economic growth of any country involved while at the same time costing people their jobs. Furthermore, it may also cause inflation since tariffs will increase the prices of any import.
Trade wars have become popular in the modern world. A good example is on January 22, 2018 when the US President Donald Trump decided to import quotas and tariffs on Chinese washing machines and solar panels. This action led to confrontations between the two nations since China is a world leader in solar equipment manufacturing. Although they are at times beneficial, trade wars can lead to the downfall of a country. It is for this reason that world organizations are trying to eliminate it.