What is a Trade War?
The idea of trade wars or barriers has existed for several hundred years. Nations all over the world want to act in their own best interests, and that’s how trade wars start. There are several ways countries may impose restrictions on each other, such as:
Tariffs
Tariffs are taxes imposed on imported goods that encourage businesses in a nation to source goods from other countries while increasing pressure against their trading partner. Most of the time, the country the tariffs are imposed upon will retaliate with tariffs of its own. Tariffs are one of the first options a nation will attempt when protecting its economic interests.
Currency Devaluation
When a nation’s government takes action to weaken the value of its money, it’s known as currency devaluation. In a trade war, it occurs when a country is trying to make exports cheaper and imports more expensive. Currency devaluation is a response to tariffs, as the country affected tries to keep goods competitively priced.
Embargoes and Export Restrictions
Embargoes are used to pause trade with specific countries to achieve political aims. Export restrictions are used to limit sales of critical goods, such as technology. Both of these measures are considered extreme. They can devastate economies and disrupt supply chains, and while they are powerful, they’re very risky. They often provoke the affected nations to retaliate, which escalates any tensions.
When a nation imposes a tariff on another nation, you may think that only the economies of the two nations will be affected. However, it’ll end up affecting the global supply chain and could lead to conflicts. Though mutual agreements may result, the effects of these restrictions seem to always outweigh the benefits.
History of U.S. Trade Wars
Throughout the last couple of hundred years, there have been significant global trade wars.
The Smoot-Hawley Tariff Act was enacted in 1930 against European nations. It was enacted to protect American farmers from European agricultural competition, raising tariffs even higher than what they had already been. This Act affected the global economy, as it declined due to various nations ceasing their own global trade. It has since been seen as a trigger for the Great Depression.
In the fall of 1973, the Arab oil embargo was enacted on the U.S. and several other nations. The embargo led to higher oil costs and a shortage of fuel, causing the U.S. to rethink its dependence on oil from the Middle East. The embargo was lifted in the spring of 1974, but it led to many changes, including the domestic energy policy and increased domestic oil production.
Since 2018, the U.S.-China trade war has been ongoing. It began when the U.S. imposed tariffs on Chinese goods, causing China to retaliate with its own tariffs. The trade war has been marked by various increases, decreases, agreements, and tensions.
Current Trade War Climate
U.S.-China
As previously mentioned, the U.S.-China trade war is an ongoing conflict. In July of 2018, the current trade war began when the U.S. imposed a 25% tariff on Chinese imports, such as electronics. Various phases were enacted, and with each one, China responded in kind. In 2020, an agreement was reached between the two nations, but it began to falter throughout 2021 before it officially expired. Between 2022 and 2024, the trade war quieted before surging again in late 2024. In early 2025, higher tariffs against China were once again enacted.
As of today, several tariffs have been imposed against China. A Forced-Labor Section 301 Duty 12.5% tariff on Chinese goods was imposed on July 24th. Strategic Sector Tariffs range from 25-100% on various product groups. A 15% Polysilicon levy will be imposed in late 2026.
China has retaliated against these tariffs with its own. They have implemented a 15-25% tariff against U.S. energy and metals, such as steel and coal. Various other tariffs have been implemented against multiple industries, ranging from 10-80%.
U.S.-Canada
Tensions between the U.S. and Canada have grown in recent years. Various tariffs have been implemented, then restructured. On July 20th, it was announced that 50% tariffs would be implemented on Canadian imports. The tariffs were a direct response to the alleged discrimination against U.S. goods imported into Canada. Imports of U.S. motor vehicles fell 22%, while other countries’ imports rose. Imports of U.S. alcoholic beverages fell 81% after several provinces pulled them from store shelves.
Goods under the U.S.-Mexico-Canada Agreement (USMCA) will not be exempt from the new tariffs. The new tariffs are the largest and most aggressive trade actions towards Canada in decades and will upset the North American supply chains, causing economic uncertainty. The tariffs are planned to go into effect on August 19th at 12:01 am. Currently, negotiations have begun between Canada and the U.S. to try and prevent the tariffs from going into effect.
U.S. and Global Tariffs
On July 24th, President Trump announced plans to implement tariffs between 10-12.5% on 60 economies. The tariffs are against countries that have not adequately enforced a ban on forced labor goods. As of August 11th, several countries have begun to appeal to the Office of the United States Trade Representative (USTR) to have the tariffs lowered or repealed. The tariffs affect almost 99.4% of all U.S. imports and went into effect at 12:01 am on July 24th.
Impact on Global Freight
Trade wars impact global freight in a variety of ways. Established trade routes are disrupted, prompting companies to rethink their logistics. Some companies switch their suppliers in response to tariffs or embargoes, which can lead to supply chain delays due to production slowdowns. If a company doesn’t switch suppliers in response to a tariff, their product costs are raised to account for the added fees and normally fall onto the consumers. Some businesses move their production to tariff-free regions, such as Southeast Asia, to minimize risks.
For freight and logistics companies, it’s imperative to adapt to the changes caused by trade wars. Though companies rely on predictable and cost-efficient supply chains, it’s best to prepare for when it all shifts. Don’t get comfortable with a few shipping routes and production centers; always look for areas that won’t be affected by potential tariffs.
It’s best to keep updated on current conditions. When a trade war begins, it generally exposes flaws in global freight operations and their ability to comply with the new regulations. Make sure to stay informed about any trade policy changes, customs procedures, and documentation requirements. If the correct paperwork and permits aren’t completed, it could lead to a delay in shipment or additional fines, complicating the process further.
Conclusion
Trade wars may be between several nations, but their impact is far-reaching.
Global trade slowly halts when trade wars begin. Trade routes shift, causing businesses to replan their production. They are faced with several decisions on how to proceed. Do they switch production or continue with the affected country? Do they absorb the tariff costs or let it fall onto the consumers? There’s no right answer for a business to choose from.
The global economy changes when trade wars begin. If a country devalues its currency, that will affect the economies of various countries’ goods. If prices are raised, it may raise rates globally. Supply chains are fractured as countries start to rely on supplying their goods domestically, shifting from open cooperation to protectionism.
Businesses need to plan for shifting trade regulations before they happen. Keeping informed of global freight changes helps a business adapt faster, changing their routes with ease. If a business remains uninformed, their logistics will falter with each added tariff and regulation. Prepare your business before trade wars disrupt your supply chain.
