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How to recognize a trade war

Calm before the storm. West Lake in Hangzhou, China. Photo: Johannes Eisele / AFP / Getty

With billions of dollars in tariffs threatened on both sides, the U.S. and China look like warring nations. But experienced trade hands tell us these are only appearances — it's the chest-thumping brinksmanship stage of negotiations, they say.

Okay, but if so, when will we know we are watching war?

After all, in a report this week, Brookings estimates that Chinese tariffs just threatened to date — a "shrewdly chosen 'hit list' of hallmark American industries" — could cost 2.1 million U.S. jobs.

  • "We are in uncharted territory," says Chad Bown of the Peterson Institute for International Economics, tells me. "It’s more like we’ll know it when we see it."
  • Cornell University's Eswar Prasad says it's not all that inscrutable. "When both sides actually start levying the tariffs, then we will be in a trade war," Prasad told me.

Bonus: The nearest example of out-and-out trade war is the 1930s, after the U.S. enacted the Smoot-Hawley tariffs. Read this description by Bown and his Peterson colleague Douglas Irwin.