TRADE WAR

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Trade war between competitors in a sector

Trade wars between competitors are conflicts between companies competing in the same market. These wars are triggered when a company feels that another company is threatening its market position, and begins to take action to counter the threat. These measures can range from price reductions to the launch of new products or services that are more attractive to customers. In some cases, companies, They may even launch aggressive advertising campaigns to discredit their competitors and gain market share.

While trade wars can be beneficial for consumers, who can get better prices and products, they can also have negative effects on the overall economy. If companies involved in the trade war reduce prices too much, they may end up losing money, which can lead to layoffs and bankruptcies. In addition, if the trade war drags on too long, it can create uncertainty and volatility in the market, which can have negative effects on the overall economy.

Risks for entrepreneurs when entering a sector in a trade war

Trade wars between competitors can pose a major threat to new entrants in a market, as they may find it difficult to compete against more established and well-positioned companies in the market. Some of the most common risks faced by new entrants in a trade war include:

1. Loss of market share: If an incumbent company launches an aggressive price or offer campaign to attract the new entrant's customers, this may lead to a loss of market share for the new entrant.
2. Difficulties in obtaining funding: trade wars can deter investors from financing new entrants to a market, as they perceive the risk to be too high.
3. Lack of experience: New entrants may lack the necessary experience to compete in a market, especially if they are competing with larger, more established companies.
4. Pressure on prices and profit margins: new entrants may be forced to reduce prices to compete, which may affect profit margins and profitability.
5. Difficulties in developing a brand and reputation: new entrants may find it difficult to develop a brand and reputation in a saturated and highly competitive market.

In summary, new entrants to a market may face many challenges in a trade war, but it is important to remember that there are also opportunities for those who are willing to work hard, be creative and find ways to differentiate themselves from their competitors.

Tips for an entrepreneur to detect trade wars between competitors:

1. Monitor the market: It is important for the entrepreneur to keep abreast of market trends and competitor movements. This will allow him/her to identify opportunities and risks.
2. Analyse the competition: it is necessary for the entrepreneur to analyse the competition in detail, identifying their strengths, weaknesses, strategies and actions in the market.
3. Identify market segments: the entrepreneur must define his market segment and know the profiles and needs of his customers. This will allow him to differentiate himself from the competition and offer added value.
4. Observe prices and promotions: the entrepreneur should monitor competitors' prices and promotions to adjust his pricing strategy and offer promotions that differentiate him from competitors.
5. Know the threats: It is important for the entrepreneur to identify potential threats in the market, such as new entrants, substitute products or changes in regulations.
6. Maintain open communication: the entrepreneur should establish open communication with customers, suppliers and other market actors to detect opportunities and threats.

By following these tips, the entrepreneur will be able to detect and avoid trade wars with his competitors, and make strategic decisions that will position him effectively in the market. The Trade War is the adoption by a country or group of countries of measures or tariffs that hinder trade with third countries. This practice is diametrically opposed to the Free trade. As a general rule, it is considered a very unproductive event for the parties involved. It tends to generate discontent among the populations of the countries involved.

What are the weapons for waging a trade war?

The most common way to conduct a trade war is through the application of tariffs to products exported by the country with which it wants to compete. This usually results in a similar response from the other affected side. This starts an escalation in tariff policies. However, another way to conduct a trade war is by increase the subsidies received by certain productive sectors in a country. Thus blocking the import of goods from other countries, because it would become more expensive than buying them from domestic producers.

This method is more difficult to counteract on the affected side. In addition, it usually also harms countries that were not involved in the trade war, since their trade balances may also be affected by the increase in subsidies, either because they cannot export their products because they are more expensive, or because they cannot import products from that country because the demand in that country makes them more expensive to export.

US vs. Japan trade war

The biggest trade war in history in terms of its level of economic impact has been forged on the basis of a number of facts:

• First quarter of 2018. The United States imposes new tariffs on imports of solar panels, washing machines, steel and aluminium from around the world.
• April 2018. China responds by imposing tariffs on 120 types of US products worth USD 3 billion.
• July 2018. Washington imposes new tariffs on $34 billion worth of Chinese goods. Beijing responds with tariffs on US goods worth another 34 billion dollars.
• August 2018. US announces tariffs on more Chinese goods, worth 16 billion. Beijing strikes back with tariffs equivalent to another 16 billion on imported US goods.
• September 2018. Washington adds tariffs of 10% on a list of 200 billion worth of Chinese goods. Beijing responds with tariffs on 60 billion worth of US goods.
• May 2019. The White House decides to increase to 25% the tariffs imposed on the list of products approved in September (on more than 5,000 Chinese products valued at 200 billion dollars). Beijing states that there will be retaliation, without specifying.

The consequences of these battles are extremely important for the world. It generates instability, movements of financial flows and turbulence in the global economy.