Tariff wars, or you can say trade wars, are a diplomatic tool of any country to safeguard domestic companies or manufacturers. Sometimes countries use trade wars to counter other countries for their diplomatic disputes. For example, USA put huge tariffs on Chinese products to counter their anti-American policies.
Let’s understand first, what is the Tariff
Tariff is a tax imposed by the local government on imported goods and services, which can be similar for all other countries or different tariffs for different countries, that’s why imported goods & services are usually expensive than domestic goods & services.
What is Trade War?
When a country imposes a high unacceptable tariff on any particular country to retaliate against any diplomatic issues with that country, and in response, that country also imposes a huge tariff on the first country in return, and this process is not stopped in a single step, that’s called tariff wars or trade wars.
A tariff war happens when:
A country imposed unacceptable tax on imported goods & services coming from a particular county. In response, the second country retaliates by imposing its own tariffs.
This back-and-forth continues, often escalating and harming both economies.
History of US-China War
These two giant economies are not new to trade wars, they have been doing these practices for the last 2 decades. Over the years USA has accused China of unfair trade practices, Fraud in intellectual property and illegal data transfers. China was always in trade surplus with USA and that’s the prime reason to spark the trade wars between these two countries.
In 2017, USA launches a investigation under section 301 of trade Act against China & accuses of IP theft.
In 2018, the U.S. imposes global tariffs on steel (25%) and aluminum (10%). China responds with tariffs on $3 billion worth of U.S. goods
First official tariffs imposed:
U.S. imposes 25% tariffs on $34 billion of Chinese goods.
China retaliates with equal tariffs on U.S. imports (soybeans, cars, etc.)
The U.S. expands tariffs to cover $250 billion in Chinese goods. China retaliates with tariffs on $110 billion of U.S. goods.
In 2019, Both countries tried trade talk but it broke down. The U.S. raises tariffs again and brands China as a currency manipulator. Later this year US sets 15% tax on $300 billion of Chinese goods.
In 2020, Both Countries tried new trade talks, and China agreed to import $200 billion of US products in 2 years, and they agreed on IP protection, tech transfers, and currency regulations deals. Some tariffs will ease between both countries, but most tariffs remain the same as before, and THE COVID-19 era further strained this relationship.
2021–Present, Under Biden, tariffs remain largely in place. Relationships remain tense over trade, technology, and geopolitics. After Trump’s second presidential tenure, the US-China trade war became a hot topic for the world. The US increased tariffs on Chinese products to 125% in a stepwise retaliation game. In June 2025, both countries will sit down to resolve this trade war.
Consequences of Tariff Wars:
Higher prices for consumers.
Slower economic growth.
Disruption of global trade.
Strained diplomatic relations.