What the Trump’s tariffs do to your wallet and economy? No Trade War?

Tariffs can lead to retaliatory tariffs from other countries, which can result in a trade war. That is why the World Trade Organization (WTO) aims to reduce trade barriers and prevent trade wars. A tariff is a tax on imported goods and services. Tariffs are a type of trade barrier that raise prices and reduce the quantity of goods available.

Let’s say the United States government levied a 20% tariff on laptops imported from China. The tariff would then increase the price of a $1,000 laptop to $1,200. With this, China made laptops become more expensive and hence a similar US made laptop become more appealing to buyers.

There are multiple reasons why countries impose tariffs. Income generation, local employment creation, price advantage to domestic goods, avoid relying heavily on different countries, retaliatory tariffs, higher prices on some goods etc. are some of the consequences of tariffs. Counties can request World Trade Organization (WTO) to resolve tariff wars.