Sma Darul HIkam

How a trade war

started
M. Razaan Ar Rasyidun Noor Xii-IPA-3

Razaan
11-18-2019
Table Of contents
What is a trade war?...................................................................................................................1
How could a trade war started?..................................................................................................2
References……………………………………………………………………………………..8
What is a trade war?

A trade war is an economic conflict resulting from extreme protectionism in

which states raise or create tariffs or other trade barriers against each other in response to trade
barriers created by the other party. Increased protection causes both nations' output
compositions to move towards their autarky position.

Trade wars could be escalated to full conflict between states, as evidenced in

the Massacre of the Bandanese after alleged violations of a new treaty. The First Anglo-Dutch
War caused by disputes over trade, the war began with English attacks on Dutch merchant
shipping, but expanded to vast fleet actions. The Second Anglo-Dutch War for control over the
seas and trade routes, where England tried to end the Dutch domination of world trade during
a period of intense European commercial rivalry. The Fourth Anglo-Dutch War over British
and Dutch disagreements on the legality and conduct of Dutch trade with Britain's enemies in
that war. The Shimonoseki Campaign after unrest over the shogunate's open-door policy to
foreign trade. The First Opium War which started after the Qing government blockaded its
ports, confiscated opium contraband and confined British traders, resulted in the dispatch of
the British Navy to China and engage the Chinese Navy in the Battle of Kowloon. The First
Opium War eventually led to the British colony of Hong Kong, and the Second Opium War,
which arose from another trade war with the same underlying causes, expanded the British
possessions on the island.
 How could a Trade war Started?

Trade war usually started because political tension between two countries. Usually
country that happened to be in trade war tried to devaluate the enemy economic and political
power in world trades. There’s a lot of variation in trade war. It range from Currency war,
Customs war, Economic sanctions, Economic warfare. Trade war also known as Currency
war, also known as competitive devaluations, is a condition in international affairs where
countries seek to gain a trade advantage over other countries by causing the exchange rate of
their currency to fall in relation to other currencies. As the exchange rate of a country's currency
falls, exports become more competitive in other countries, and imports into the country become
more and more expensive. Both effects benefit the domestic industry, and thus employment,
which receives a boost in demand from both domestic and foreign markets. However, the price
increases for import goods (as well as in the cost of foreign travel) are unpopular as they harm
citizens' purchasing power; and when all countries adopt a similar strategy, it can lead to a
general decline in international trade, harming all countries.

Historically, competitive devaluations have been rare as countries have generally

preferred to maintain a high value for their currency. Countries have generally allowed market
forces to work, or have participated in systems of managed exchanges rates. An exception
occurred when a currency war broke out in the 1930s when countries abandoned the gold
standard during the Great Depression and used currency devaluations in an attempt to stimulate
their economies. Since this effectively pushes unemployment overseas, trading partners
quickly retaliated with their own devaluations. The period is considered to have been an
adverse situation for all concerned, as unpredictable changes in exchange rates reduced overall
international trade.

According to Guido Mantega, former Brazilian Minister for Finance, a global currency
war broke out in 2010. This view was echoed by numerous other government officials and
financial journalists from around the world. Other senior policy makers and journalists
suggested the phrase "currency war" overstated the extent of hostility. With a few exceptions,
such as Mantega, even commentators who agreed there had been a currency war in 2010
generally concluded that it had fizzled out by mid-2011.

States engaging in possible competitive devaluation since 2010 have used a mix of
policy tools, including direct government intervention, the imposition of capital controls, and,
indirectly, quantitative easing. While many countries experienced undesirable upward pressure
on their exchange rates and took part in the ongoing arguments, the most notable dimension of
the 2010–11 episode was the rhetorical conflict between the United States and China over the
valuation of the yuan. In January 2013, measures announced by Japan which were expected to
devalue its currency sparked concern of a possible second 21st century currency war breaking
out, this time with the principal source of tension being not China versus the US, but Japan
versus the Eurozone. By late February, concerns of a new outbreak of currency war had been
mostly allayed, after the G7 and G20 issued statements committing to avoid competitive
devaluation. After the European Central Bank launched a fresh programme of quantitative
easing in January 2015, there was once again an intensification of discussion about currency
war.

A Customs war, also known as a toll war or tariff war, is a type of economic conflict
between two or more states. In order to pressure one of the states, the other raises taxes
or tariffs for some of the products of that state. As a reprisal, the latter state may also increase
the tariffs.

One example of a modern tariff war occurred in the 1920s and 1930s between
the Weimar Republic and Poland, in the German–Polish customs war. The Weimar Republic,
led by Gustav Stresemann wanted to force Poland, by creating an economic crisis by increasing
the tolls for coal and steel products developed there, to give up its territory. As a reprisal, the
Poles increased toll rates for many German products. This led to fast development of the port
of Gdynia, which was the only way Poland could export its goods to Western Europe without
having to transport them through Germany.

In September 1922 the Fordney–McCumber Tariff (named after Joseph Fordney, chair
of the House Ways and Means Committee, and Porter McCumber, chair of the Senate Finance
Committee) was signed by U.S. President Warren G. Harding.[1] In the end, the tariff law raised
the average American ad valorem tariff rate to 38 percent.

Trading partners complained immediately. Those injured by World War I said that,
without access by their exports to the American market, they would not be able to make
payments to America on war loans. But others saw that this tariff increase would have broader
deleterious effects. Democratic Representative Cordell Hull said, "Our foreign markets depend
both on the efficiency of our production and the tariffs of countries in which we would sell.
Our own [high] tariffs are an important factor in each. They injure the former and invite the
latter."

Five years after the passage of the tariff, American trading partners had raised their own
tariffs by a significant degree. France raised its tariffs on automobiles from 45% to
100%, Spain raised tariffs on American goods by 40%, and Germany and Italy raised tariffs on
wheat. This customs war is often cited as one of the main causes of the Great Depression.

The World Trade Organization was created to avoid customs wars, which are considered to be
harmful to the world's economy.

Economic sanctions (synonym: embargo) are commercial and financial penalties

applied by one or more countries against a targeted self-governing state, group, or
individual. Economic sanctions are not necessarily imposed because of economic
circumstances—they may also be imposed for a variety of political, military, and social issues.
Economic sanctions can be used for achieving domestic and international purposes.

Economic sanctions generally aim to change the behaviour of elites in the target
country. However, the efficacy of sanctions is debatable and sanctions can have unintended
consequences.

We can see this currently happening in North Korea. North korea receive it economic
sanction from the USA, Japanese , and South korea. After the Korean war to limit its usage and
experiment on nuclear and biotechnology. However North Korea able to find a loop hole from
this economic sanction. The north Korean government use neutral country such as hongkong
macau that geographically closer to North Korea. North Korean use country neutrality to fund
its nuclear and biotechnology and levitate its economy to considerable level.

The Oxford English Dictionary defines economic warfare or economic war as

involving "an economic strategy based on the use of measures (e.g. blockade) of which the
primary effect is to weaken the economy of another state".

In military operations, economic warfare may reflect economic policy followed as a

part of open or covert operations, cyber operations, information operations during or
preceding wartime. Economic warfare aims to capture or otherwise control the supply of
critical economic resources so that the military and intelligence agencies can operate at full
efficiency or deprive enemy forces of those resources so that they cannot function properly.
 The concept of economic warfare is most applicable to conflict between nation states,
especially in times of total war - which involves not only the armed forces of an enemy nation,
but mobilization of that nation's entire economy towards the war effort. In such a situation,
causing damage to the enemy's economy directly damages the enemy's ability to fight the war.

Policies and measures in economic warfare may

include blockade, blacklisting, preclusive purchasing, rewards and the capturing or control of
enemy assets or supply lines, tariff discrimination, sanctions, the suspension of aid, the
freezing of capital assets, the prohibition of investment and other capital flows,
and expropriation. Scorched earth policies have often been applied to prevent an advancing
enemy from gaining resources.

Thus from the text above we can conclude that trade war happened. Because of the
following reason. A politically diverse and strong economics need to maintain its supremacy
between the world trades. And a lot of type of sanctions and methods may applicable for nation
its current trade war.
References

http://www.businessdictionary.com/definition/trade-war.html

Definition of trade war page 1 paragraph1

https://www.lexico.com/en/definition/economic_war

http://eprints.qut.edu.au/15900/1/Robert_Deakin_Thesis.pdf

http://search.eb.com/eb/article-9396766 ( Smoot-Hawley Tariff Act. (2005). Encyclopædia

Britannica. Retrieved October 15, 2005)

https://web.archive.org/web/20130517115213/http://www2.gcc.edu/dept/econ/ASSC/Papers2
005/Embargo1807_Snyder.pdf ( Aaron Snyder , Jeffery herbener American economic history
before 1860 , December 15 2004)

Shambuh George, “Economic warfare” Encyclopedia Brittanica

Wn Medicott The economic blockade ( 1978)

David livington Gordon, and Roydon james Dangerfield. The Hidden weapon: Story of
economic warfare(Harper 1947 )

Christian Letz “ More carrot than stick “ British economic warfare and spain, 1941 -1944”
Twentieth Century british history 9.2 (1988): 246-273

Hans-Jurgen Tueterberg “ Food provisioning on the german home front 1914-1918” in Rachel
duffet and Ina Zweineger -Bargelowska , eds Food War in Twentieth century Europe ( 2016).
77-89