About A Trade War
Welcome back. I have been getting a lot of questions regarding a trade war and why does it even happen. I have also received requests to publish a simplified version of what a trade war is. There’s been a lot happening lately between the United States and China.
I always try to simplify things for my readers and this post is another attempt to simplify the trade war concept, tariffs and so forth. Because of how I trade , I am very interested in understanding how the markets work and anything that might cause a market reaction. I also trade a lot of Geopolitics.
What exactly is a trade war?
A trade war is an economic conflict resulting from extreme protectionism in which states raise or impose tariffs or other trade hindrances against each other in response to trade barriers imposed by the other state.
What is a Protectionism?
Protectionism is an economic policy that restricts imports from other countries by imposing or raising tariffs on imported goods and import quotas.
What Is A Tariff?
A tariff is a custom tax paid on imports or exports between states and it is also used to regulate foreign trades.
What Are import quotas?
The import quota is a physical limitation of the quantities of different products (imports) from foreign countries that can be imported into the country within a specified time period.
Why Are Tariffs Used?
The main aim of using protective tariffs is to protect the country’s domestic industries and to make the goods that are imported from foreign countries to be less attractive and more expensive and basically to promote the use of local goods.
They are used when the country’s domestic industry feels threatened by foreign industries. It is also to put domestic products which are in the same market at an advantage by making the imports more expensive. The disadvantages are when the other party retaliate and raises their tariffs on their exports to protect their domestic products as well.
What Is US Trade War?
Since the 22nd of January 2018, United States and China have been engaged in a trade war involving the mutual placement of tariffs. US President Donald Trump had declared in his campaign that he wants fix China’s longtime unfair trade practices.
Example Of A Trade War
A recent ban of Huawei in the US markets has “broken” the internet and the news have been circulating and they are on everyone’s tongue. China said that they will retaliate. It is also reported that sneaker giants Adidas and Nike have written a letter to Donald trump asking him to reconsider the tariffs imposed on Chinese imports.
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