What Is the Trade War? Understanding Trump's Tariffs for Non-Native English Speakers

You will notice throughout the article I have highlighted key words, these are advanced vocabulary that are important when discussing business on a global scale.

I have included definitions and examples at the bottom of the article, but try to check your understanding as you read through the text.

The term "tariff war" often comes up in discussions about international trade, but what does it really mean? This article aims to clarify the concept of a tariff war, focusing on the actions taken by President Donald Trump. We will simplify complex ideas and provide specific examples that help illustrate the impact of these decisions.

What Are Tariffs?

Tariffs are taxes that governments place on goods imported from other countries. When a country buys products made abroad, it usually has to pay extra money in the form of a tariff. This extra cost typically makes imported goods more expensive. As a result, consumers might choose to buy domestically made items instead.

For instance, if you wanted to purchase a car from Germany priced at $30,000, a 25% tariff would add an additional $7,500 to the cost. Therefore, you would pay $37,500 for the same car if it were subject to a tariff.

What is the Trade War?

A "trade war" describes a situation where countries raise tariffs on each other's goods. This often occurs when one country perceives the other as acting unfairly in trade. The goal is often to protect local businesses from foreign competition.

Currently we are seeing that the U.S. under Trump's administration has initiated incredibly high tariffs on around $250 billion worth of goods from China. In response, China imposed tariffs on about $110 billion in American products. This cycle of increasing tariffs is what we refer to as a tariff or trade war.

Why Did Trump Start the Tariff War?

Donald Trump believes that many countries were benefiting at the expense of the United States in trade deals. He felt that American companies struggled to compete against cheaper goods from countries like China.

Trump also has the idea to bring work back to American factories and American soil, however this depends on many factors including; do Americans want to work in these factories, and if so the minimum wage for Americans is a lot higher than the minimum wage for migrants, or importing from overseas. There is also the concern that Trump intends to take raw materials from countries such as Ukraine and bring them back to the US. Would there be any guarantee that he would then sell these goods back to Ukraine at a fair price?

Trump aims to create a more equitable trade environment. By imposing tariffs, he hopes to encourage other nations to pay more for their products while simultaneously making American products more appealing. The Trump administration argues that these measures would ultimately help American manufacturers and boost domestic job creation, even though some studies suggested that job losses in manufacturing could range from 300,000 to 500,000 due to retaliatory tariffs.

Some people believe that he actually has no intention of creating jobs for Americans, but he actually intends to create a fully automated, AI-driven fleet of factories and manufacturing plants that require little to no human participation.

This is only speculation but considering the amount of 'Tech buddies' he has - this could certainly be a realistic situation.

The Impact of Tariffs on Consumers

The tariff war has had various effects on consumers. When tariffs are implemented, prices for imported goods generally increase. This means that consumers end up paying more for items they used to buy at a lower price.

For example, a tariff on electronics from China could raise the price of smartphones and televisions by 10% or more. Although Trump's intention was to protect American businesses, many consumers found themselves spending more on everyday essentials. A study from the Federal Reserve Bank of New York showed that tariffs led to an average price increase of nearly 3%, impacting households nationwide.

The Economic Consequences

The impact of the tariff will extend beyond consumers; it also had broader economic implications. Businesses that relied on imported materials face higher production costs. This could result in layoffs or reduced production rates, affecting jobs and the economy at large.

Additionally, retaliatory tariffs from foreign countries create obstacles for American companies. For example, U.S. soybeans, once a significant export to China, saw a drop of about 74% in shipments when Trump implemented Tariffs during his first Presidency in 2018, leaving many American farmers struggling to find other markets for their products.

International Reactions to Trump's Tariff Decisions

Reactions to the tariffs in 2018 were mixed globally. Some countries supported Trump's stance, believing it was crucial to address unfair trade practices. Others criticised the tariff war, arguing it could harm global trade and destabilise economies.

In response to U.S. tariffs, many countries began seeking new trade partners or enhancing existing agreements with other nations. For example, the European Union increased trade talks with nations in Asia and Latin America, demonstrating how interconnected global trade is and how one country's decisions can reverberate throughout the world.

We are of course not sure how the implemented tariffs second time around will affect the economy, but we are already seeing negative impacts. If you own stocks and shares, you will see they significantly nose-dived after the tariffs were implemented, the US stock market is crashing as I write this, and China is increasingly retaliating against Trump's decisions.

The Role of Negotiations

As the tariff war intensifies, negotiations aimed at resolving trade disputes are initiated. These discussions seek to lower tariffs and establish a better trade balance, even if that requires limiting trade with America.

However, many experts believe that the damage from the tariff war has lasting effects on international trade relations. The complexities of global trade emphasise the challenges faced by all countries involved.

Wrapping Up the Tariff War

The tariff war initiated by Trump has significantly altered the landscape of international trade. While the intention was to safeguard American companies, the consequences have proven to be complex and extensive.

Understanding these matters is essential for anyone interested in global economic news. As discussions continue and the state of tariffs evolves, the international community is keenly aware of how these choices will influence the future of trade worldwide.

A busy port showcasing international trade.

Grasping the intricacies of a tariff war is vital for everyone engaged in or following global trade. By staying informed, non-native English speakers can better understand the shifts around them and how these decisions could impact their daily lives.

Vocabulary and Definitions;

Consumers People who buy and use goods and services

Consumers are becoming more conscious of how their purchases affect the environment.

Domestically Within a particular country (usually your own).

The company decided to produce its goods domestically instead of outsourcing.

Administration The group of people in executive authority within a government, especially the leadership during a specific term.

The new administration introduced several economic reforms.

In response As a reaction to something.

In response to public protests, the law was revised.

Compete To try to win or be better than others in a contest or market.

Small businesses often struggle to compete with large corporations.

Raw materials Basic, natural substances used to produce goods.

The factory imports raw materials like rubber and steel.

Equitable Fair and impartial.

The goal is to create an equitable healthcare system.

Intention A plan or aim to do something.

She had every intention of finishing the report by Monday.

Automated Operated or controlled by machines or computers with minimal human input.

The warehouse uses an automated system to track inventory.

Speculation The act of guessing or forming a theory without full evidence; in finance, the act of investing based on expected price changes.

There was widespread speculation about the company's next move.

Various Different kinds or types; diverse.

He tried various methods to solve the problem.

Implemented Put into effect or action.

The school implemented a new dress code policy.

Impacting Affecting or influencing something.

The drought is seriously impacting crop production.

Relied on Depended on for support or help.

She relied on her savings while looking for a job.

Layoffs Terminations of employment, usually due to budget cuts or restructuring.

The company announced major layoffs due to declining sales.

Retaliatory Done in revenge or response to a perceived wrong.

The country imposed retaliatory tariffs on imported goods.

Destabilise To make something unstable or less secure.

The coup attempt threatened to destabilise the entire region.

Interconnected Linked or related to each other.

The global economy is highly interconnected.

Reverberate To echo or have a continuing effect.

The decision reverberated through the financial markets.

Nose-dived (idiom) Decreased very quickly and suddenly.

After the scandal, the company’s stock price nose-dived.

Establish To set up or create something that is meant to last. 

The organization was established in 1995.

Extensive Large in amount or scope. 

The storm caused extensive damage to the area.

Keenly In an intense or eager way; sharply.

She was keenly aware of the challenges ahead.

Intricacies The small, complex details of something. 

He explained the intricacies of international trade.