ABSTRACT
Chapter 1 addresses several general issues related to trade wars, laying the foundation for the analysis of the US–China trade war in the subsequent chapters. We believe that both historical and theoretical perspectives are needed to understand a trade war – its causes, processes and impacts – and to deal with it effectively. After a brief conceptual discussion, therefore, the chapter reviews the history and theory about trade wars. The historical section of the chapter pays particular attention to the evolution of international trade policies and domestic trade politics of the United States, which have led to several major trade conflicts during the past century or so. The theoretical section of the chapter first provides a review of the existing literature in international economics, which helps us understand why trade wars break out and what their welfare effects are. It then presents the game theoretical approach, explaining how trade wars are fought and where they end.
