In the international system, trade creates platform for interaction. It allows for movement of goods and services across sovereign boundaries in both exports and imports. Trade is simply the exchange of goods and services between and amongst states with a view to make gains and satisfy the demands of buyers. However it is defined, international trade talks of cross border businesses, exchange of goods and service which takes place in a global market place which is usually controlled by tariffs and trade agreements. Good as it is, trade is an instrument for diplomacy. It is used to encourage friendly relationship with certain countries on the one hand, and used to beat erring nations into line on the other. Therefore, trade can aptly be described as a weapon, depending on its deployment. It is the negative use of trade that triggers trade wars.
To put it succinctly, trade war is the act of imposition of different types of trade barriers by different countries on each other’s merchandise in reaction to perceived unfriendly trade practices, usually with a claim to protect domestic manufacturers or producers. Trade wars manifests in hike in tariffs, introduction of quota, and in some cases, outright ban of some goods leading to retaliatory trade policies which has the potential to escalate and result in a cut in international trade and general global economic growth.
Trade wars are not new to international politico-economic system. It dates back to the ancient and medieval period when we had the Peloponnesian war of 431-404 BCE when Athens and Sparta placed trade restrictions on each other; as well as the Roman trade wars in 1st - 5th Century wherein Rome emplaced trade barriers on Carthage and Egypt. In the 17th-19th centuries, there were the Dutch-English trade wars and the French-British trade wars which lead to the popular Napoleonic wars. However, in the present century, trade wars have continued to be a recurrent decimal in international economic relations. There are the US-EU trade issues; the US-India trade crisis, and perhaps the most prominent and the focus of this write-up, the US-China trade wars.
International political economists believe that The Sino-US trade war was triggered in 2018, during the first tenure of President Trump. That era saw the imposition of tariffs on Chinese manufactured washing machines and solar panels in a move to check acclaimed unfair Chinese trade behavior. As is usual, the move resulted in a reciprocal response by China who placed tariffs on American aircrafts and soybeans. Thereafter, the trade war escalated with both countries imposing more and more tariffs on each other’s goods, leading to a substantial reduction in trade between both countries and having huge impact on global trade.
Sequel to the return of Trump for his second tenure, fears of a reappearance of protectionism and trade wars with China emerged. Already, trade tension between the two largest economies is escalating ahead of the presidential inauguration. The US has targeted Chinese semiconductor industry in a latest crackdown on Chinese chips prompting China to retaliate almost immediately, banning export of critical minerals such as gallium, antimony, and germanium to the US. These are minerals that have dual-use applicability – military and civilian- and are critical in semiconductors, infrared tech as well as solar cells.
The emerging escalation of Sino-American trade frictions holds some potential for new markets to surface, allowing some other countries to take advantage and benefit from the development. However, not a few pundits believe that the looming reconfiguration of global supply chains may pose a greater challenge to the wellbeing of global economy. It therefore goes without saying that moderation on both sides is to be encouraged by the global trade watchdog, the World Trade Organization to ensure the continues expansion of global trade and to deploy the phenomenon for the greater good of the peoples of the world.
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