We live in a globalized economy. I was at a car dealership the other day. Looking at the information about one of the cars, the engine was made in one country, the body materials in another country, and the assembly of the car happened in yet another country. (All three were outside of the United States for a car sold in the United States.)
People and governments can get nervous about this globalized pattern of trade and business, and governments will seek to impose restrictions on foreign trade for a variety of reasons, such as:
"We need to protect our country's jobs from 'cheap labor' jobs when things are produced in other countries."
"We need to protect our industries -- especially new industries just trying to get started."
"We have to win the trade battle -- we don't want to be importing more goods than we export."
"We need more money to come to our government from imports. If they want to sell things in our country, they need to pay us tariffs." (Tariffs are a form of taxes on imported goods.)
As I'm writing this, the US President just had announced that he wants to impose heavy tariffs on imported steel and aluminum. His reasons for wanting to do so are all the sorts of things I just noted. In response to his announcement, the US stock market lost 2% of its value. In the globalized world we live in, a trade war between countries may not be as good for local businesses as it might sound at first.
