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What is a trade war?

On March 1st, Trump announced plans to impose a 25% tariff on imported steel and a 10% tariff on imported aluminum. The plan sent shockwaves through Washington, in part because it seemed to be caused by an unrelated temper tantrum he was having and not...economic things. Still, the move isn't too surprising since protecting the US steel industry from foreign competition has always been one of Trump's priorities. Plus, it certainly doesn't hurt that Trump's trade team has strong relations to the domestic steel industry. Commerce Secretary Wilbur Ross literally made his fortune investing in distressed steel companies.

But while this tariff is good news for US steel and aluminum producers, it's a problem for just about everyone else. Any company that relies on steel or aluminum (construction companies, automakers, developers like famed Chinese-steel user Donald J. Trump) is going to see its costs rise sharply. Factories may disappear (or never appear in the first place) as a result of material costs rising. The future is a confusing place, man.

Okay, so why is Trump doing this?

TO MAKE US CRAZY. Or, as he might say: to help the domestic steel and aluminum industry.

Between you and I, this may also be an attempt to hamper the importation of steel from Trump's enemy numero 3 (behind North Korea and Mexico): China. Many steelworkers accuse Chinese steel makers of saturating the market with cheap steel imports. The thing is, we actually get most of our foreign steel from allies likes Canada, South Korea, and Brazil, not enemies number 1-5. Canada, for example, makes more than 40% of US aluminum imports and 16% of its steel imports.

So what happens when we piss off all our friends? Trade wars.

What does a Trade War entail?

A trade war happens when, after one country puts up a trade barrier, like a tariff, in order to protect its economy from foreign competition, another country decides to strike back with its own trade barriers. US allies have already started threatening to retaliate against Trump's tariffs, with European Commission President Jean-Claude Juncker discussing tariffs on blue jeans, bourbon, and Harley-Davidson motorcycles (three huge American exports). Even our own hemisphere's nice-guy DILF, Canadian Prime Minister Justin Trudeau, threatened "responsive measures.sp

To make matters worse, Trump tweeted that if other countries retaliate, he will retaliate against their retaliation. Then our allies will retaliate against his retaliation and so on. Wars on wars and all of a sudden there's no more wine and we all die. Trump doesn't seem to really get what this all means.

And what does that mean for our economy?

If the US starts getting tariffed on exports, many Americans could lose their jobs because of decreased demand. Canada alone could hit the US in manufacturing and agricultural exports HARD. Trump's move is undermining the mutual trust granted by the World Trade Organization, which is meant to keep fair trade (though, to be fair, it has it's issues).

The last global trade war was started in 1930, right at the start of the Great Depression. When President Hoover signed into law a tariff on agricultural imports to protect American farmers. Canada and Europe retaliated. As a result, the Great Depression actually got even worse and global trade basically collapsed. During that time, US exports fell by over 40%, and other countries saw similar economic damage. Some began adopting nationalist policies and many believe that contributed to the outbreak of World War II.

Things are terrifying enough right now - let's not go down that road.