We’re in a trade war. Now what?

The Basics

We’ll get to that, but first let’s boil down what a trade war is exactly. There’s no “official” definition, but it generally describes the back-and-forth between countries that are trying to restrict each other’s trade.

Months of escalating threats between the U.S. and China have become a reality. In early July, the U.S. began applying new tariffs on $34 billion worth of Chinese goods, including printers and industrial parts. China in turn slapped penalties on American products like cotton, soybeans and pork. In response, the U.S. has imposed more tariffs on Chinese products. They targeted $16 billion worth of Chinese goods on Aug. 23, and placed an additional set of tariffs on $200 billion worth of Chinese goods on Sept. 24.

Why are we in a trade war?

The Trump administration has given different reasons for the various sets of tariffs it’s imposed, but they generally stem from the “five pillars” set out in its trade agenda:

  • a trade policy that supports national security
  • strengthening the American economy
  • negotiating trade deals that work for all Americans
  • enforcing and defending U.S. trade laws
  • strengthening the multilateral trading system

U.S. tariffs on imports

  • Chinese products

    Rate:
    10–25%
    Dollar value:
    $250 billion
    Applies to:
    Over 6,000 Chinese products
  • Steel

    Rate:
    25%
    Imports in 2017:
    $29 billion
    Applies to:
    All foreign countries
  • Aluminum

    Rate:
    10%
    Imports in 2017:
    $17 billion
    Applies to:
    All foreign countries

Retaliatory tariffs on U.S. goods

  • China

    Affects over 5,000 products including:
    • pork
    • tobacco
    • whiskey
    Dollar value:
    $110 billion
  • The European Union

    Affects over 100 products including:
    • orange juice
    • whiskey
    • motorcycles
    Dollar value:
    $3.4 billion
  • Mexico

    Affects dozens of products including:
    • bourbon
    • pork
    • cheese
    Dollar value:
    $3 billion
  • Canada

    Affects 229 products including:
    • steel
    • aluminum
    • ballpoint pens
    Dollar value:
    $12.6 billion
  • Turkey

    Affects 22 products including:
    • whiskey
    • coal
    • autos
    Dollar value:
    $533 million

How does this affect me?

The frustrating answer is that it all depends. Because while you may see clear increases on basic goods (Coke has already said it’s raising U.S. soda prices because of tariffs), it’s difficult to calculate exactly how these tariffs will filter through the economy. Depending on your income bracket, you might see your food bill increase between $100 and $300 a year if there’s an all-out trade war, according to Kadee Russ, a former Obama White House economist and an economics professor at the University of California, Davis.

There are also some common consumer products that could go up in price, like dishwashers, flat-screen TVs and clothing.

How does a trade war end?

Not well. Turns out there are usually no winners in a trade war. Monica de Bolle, a senior fellow at the Peterson Institute for International Economics, told us that when economists examined the global aftermath of a trade war, they found that “jobs were lost” and “growth was hit.”

Take, for example, the tariffs George W. Bush imposed on steel back in 2002. They were lifted much sooner than expected because even jobs in non-steel sectors were hit hard since they used steel indirectly.

“The losses for the economy were a lot bigger than whatever the politicians thought they would gain from instituting those tariffs in the first place,” Bolle said.

And also look at the Smoot-Hawley Tariff Act from the 1930s, which placed tariffs on over 20,000 imported goods. Bolle said that the measure affected “every single country” and that it probably prolonged the Great Depression.

Our Trade War Coverage