Donald Trump's tariffs: What is a trade war? How does it affect countries involved?

Newly sworn in US President has sparked what is being termed as fears of a "trade war" Donald Trump after imposing tariffs on products from Canada, Mexico and China, citing a "major threat" posed by illegal immigration and drug trafficking.

After Donald Trump's move to exercise emergency economic powers to implement the tariffs, Canadian and Mexican goods exported to the US will face a 25 per cent tariff, with energy resources from Canada subject to a reduced 10 per cent levy, starting Tuesday.

Additionally, China, which already faces tariffs, will incur an extra 10 per cent duty on its goods.

What is a trade war?

A trade war is an economic conflict between two countries that arises when one country responds to another's perceived unfair trade practices by imposing restrictions, like tariffs, on imports.

Similar to issuing sanctions against a country, a trade war uses economic means to lodge a protest against a country or at times protect your country's domestic goods from foreign competition.

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However, without adequate ability to produce domestically, issuing high tariffs on imports could backfire on a country's citizens who would have to pay higher prices for goods.

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The most recent example of actions that could lead to a trade war, needless to say, has been the tariffs introduced by US President Donald Trump on countries such as China, Mexico and Canada.

US tariffs and their effect

President Donald Trump announced a 25 per cent tariff on imports from Canada and Mexico, his neighbouring nations, due to the flow of fentanyl and undocumented immigrants into America from their shared borders. An additional 10 per cent duty had been levied on Chinese imports for its role in fentanyl supply as well.

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Canada hit back with a 25 per cent retaliatory tariff on US-made products and Mexico has announced intentions to do the same. However, in the course of these tariffs, basic items may become expensive for the average citizen. China could also issue retaliatory tariffs, though no official announcement has been made yet.

About one-third of all US imports come from the three countries Trump has targeted, as they are America's three largest trading partners.

Common products supplied from Mexico, Canada and China to America include fruits and vegetables, meat, gas, automobiles, electronics, toys, clothing, lumber, beer and spirits, among others, as reported by CNN.

The US Chamber of Commerce on Saturday warned the Trump-led administration that tariffs won’t solve the issues at the border and instead threatened to “upend supply chains” and raise prices for American families.

“When you talk about a tariff, it’s an economic war; and in war, everybody loses,” he added. “But hopefully we will come to some better results and conclusions as a result of the pain and suffering that we will go through.”