# The U.S.-China Trade War Explained

By: [Team Stash](/content/learn/author/team-stash/index.html)

Published: Aug 05, 2019  •  Updated: Aug 22, 2024

Talks collapse and threats of new tariffs affect markets.

#### In this article:

1. [**What’s happening with the trade war with China?**](/content/learn/u-s-china-trade-war-explained/#whats-happening-with-the-trade-war-with-china/index.html)
2. [**What’s a trade war again?**](/content/learn/u-s-china-trade-war-explained/#whats-a-trade-war-again/index.html)
3. [**Remember the Stash Way**](/content/learn/u-s-china-trade-war-explained/#remember-the-stash-way/index.html)

The [trade war](/content/learn/whats-happening-with-the-trade-war/index.html) with China continued to intensify this week, as President Trump said he would hit the world’s second-largest economy with new tariffs.

Stock market indexes around the world [dropped](https://www.nytimes.com/2019/08/05/business/economy/us-china-yuan-renminbi-trump.html?action=click&module=Top%20Stories&pgtype=Homepage) on Monday, August 5, 2019 as China retaliated by canceling orders for U.S. products, and by devaluing its currency.

## What’s happening with the trade war with China?

- Trade talks between China and the U.S. broke down, over an alleged agreement that China would [purchase more products](https://www.nytimes.com/2019/07/31/business/economy/us-china-trade-talks.html) from the U.S.
- The Trump administration threatened a [new round of tariffs](https://www.nytimes.com/2019/08/02/business/trump-tariffs-china-trade.html?action=click&module=RelatedCoverage&pgtype=Article&region=Footer), in addition to the $250 billion it has already placed on Chinese imports.
- In response, China has called for a [halt to purchases](https://www.bloomberg.com/news/articles/2019-08-05/china-asked-state-buyers-to-halt-u-s-agriculture-imports) of American agricultural products.
- China is also allowing the value of its currency, called the yuan, to [fall](https://www.bloomberg.com/news/articles/2019-08-05/china-s-offshore-yuan-tumbles-past-7-per-dollar-to-record-low).
- Last week, the Federal Reserve also [cut a key interest rate](/content/learn/behind-the-feds-recent-rate-cut/index.html) in the U.S., in an attempt to keep the U.S. economy from slowing down.

## What’s a trade war again?

A trade war is when countries start waging an economic battle with each other using [tariffs](https://www.export.gov/article?id=Tariff-and-Import-Fees). One country will put tariffs on another’s goods, and the other will retaliate in kind.

A tariff, sometimes called a duty, is a tax imposed by one nation on another’s imports. (In some cases, tariffs can be “levied”–or placed–on exports.) The tariff is generally calculated as a percentage of the import’s total value, including freight and insurance charges.

Governments tend to impose tariffs on another’s goods to make their own products more competitive and affordable, and to generate revenues.

The trade war with China could decrease global growth by $1.2 trillion, according to recent [reports](https://www.bloomberg.com/news/articles/2019-08-05/all-out-trade-war-could-cost-global-economy-1-2-trillion-chart). The U.S. and China are the world’s [first and second-largest](https://www.weforum.org/agenda/2018/04/the-worlds-biggest-economies-in-2018/) economies.

## Remember the Stash Way

Investing can be scary and confusing, especially when markets are [volatile](/content/learn/the-stash-way-volatility/index.html).

That’s why we’ve boiled down our investing philosophy into three basic principles that we hope can guide you as you make your first investing decisions. We call our approach the [Stash Way](/content/learn/the-stash-way/index.html). Here are its three pillars:

- Invest for the long-term
- Invest regularly
- Diversify

You can learn more about the Stash Way [here](/content/learn/the-stash-way/index.html).