A trade war is a battle between nations in which tariffs and other trade barriers are used to pursue political goals. Such policies can exacerbate tensions, harm economies, and disrupt supply chains. They can also have other effects, such as stifling innovation and increasing prices for consumers. Trade wars are often a result of disputes between major powers or regional rivals. They can also be the result of economic hardship and domestic pressures such as recession or civil unrest.
A country typically uses tariffs to raise revenue and protect domestic producers. In a trade war, foreign governments can also impose retaliatory tariffs against US products. This increases the cost of US imports for consumers, but it can also level the playing field for foreign competitors, for example by limiting access to important technologies like semiconductors that are vital to America’s economic growth.
President Trump argues that the US has been taken advantage of, and that tariffs will help reduce the trade deficit — the difference between the value of goods bought from abroad and those sold to foreign markets. However, the US economy is intertwined with global economies. Firms that sell goods to foreign customers will likely pass on some or all of the added cost, hurting ordinary Americans and their companies.
As a result of the tariffs, economic growth has slowed in the US and in other countries. The International Monetary Fund predicts slower growth for 2025 and 2026 than it expected prior to the onset of the trade war.
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