(Bloomberg) -- The term “trade war” has dominated conversation in the lead-up to American tariffs on $50 billion of Chinese imports and Beijing’s immediate threat to respond.
Yet defining the term is elusive at best, and somewhat in the eye of the beholder.
Some say a trade war between the world’s two largest economies has yet to begin, since most tariffs still aren’t in effect. Others say the war is already under way.
Still, there’s no agreed-upon meaning of “trade war” among economists, traders, politicians and others.
The term can be used to refer to a situation where there’s been at least one round of retaliation against an initial restriction on imports -- the current situation seems to fit that bill -- or one that’s broader in scope, said Benn Steil, director of international economics at the Council of Foreign Relations.
“What users of the term usually have in mind, however, are large barriers and multiple rounds of retaliation,” said Steil. “With regard to the United States and China right now, one might reasonably say that we are entering the first stage of a trade war.”
Back From Brink?
Steil and Gary Hufbauer, senior fellow and trade specialist at the Peterson Institute for International Economics, said a “trade war” can’t begin until the tariffs actually go into effect, since the protagonists always have a chance to pull back from the brink.
This includes both the U.S. tariffs on Chinese goods, and the tit-for-tat retaliatory tariffs China has threatened, they said. “Otherwise, it’s just words,” said Stiel.
The U.S. is targeting a range of Chinese products, mainly ones that are part of China’s Made in 2025 plan to become dominant in high-technology industries such as robotics, aerospace, industrial machinery and automobiles. Beijing is largely targeting U.S. farm products such as soybeans and corn.
Both say the tariffs will start to take effect in July. The U.S. earlier this year slapped tariffs on steel and aluminum imports from China and other trade partners.
‘Easy to Win’
Using the term “trade war” is highly unusual for a U.S. president, said Steil. Still, unlike predecessors who’ve shied away from inflammatory rhetoric, Trump has embraced the term. In March, Trump said in a Twitter message that “trade wars are good, and easy to win.”
Many experts disagree. And once two or more countries are entangled in a trade war, it’s very hard to get out, said Hufbauer.
For now, “we are still skirmishing, but it is more and more serious,” Harold James, professor of history and international affairs at Princeton University, said in an email. “The problem is that all sides quickly dig holes that they don’t know how to get out from.”
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