Most trade barriers work on the same principle: the imposition of some sort of cost on trade that raises the price of the traded products. If two or more nations repeatedly use trade barriers against each other, then a trade war results
Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency, this can be explained by the theory of comparative advantage. In theory, free trade involves the removal of all such barriers, except perhaps those considered necessary for health or national security. In practice, however, even those countries promoting free trade heavily subsidize certain industries, such as agriculture and steel.
International trade
International trade is the exchange of goods and services across national borders. In most countries, it represents a significant part of GDP.
Trade barriers are often criticized for the effect they have on the developing world. Because rich-country players call most of the shots and set trade policies, goods, such as crops that developing countries are best at producing, still face high barriers. Trade barriers, such as taxes on food imports or subsidies for farmers in developed economies, lead to overproduction and dumping on world markets, thus lowering prices and hurting poor-country farmers. Tariffs also tend to be anti-poor, with low rates for raw commodities and high rates for labor-intensive processed goods.
If international trade is economically enriching, imposing barriers to such exchanges will prevent the nation from fully realizing the economic gains from trade and must reduce welfare. Protection of import-competing industries with tariffs, quotas, and non-tariff barriers can lead to an over-allocation of the nation's scarce resources in the protected sectors and an under-allocation of resources in the unprotected tradeable goods industries. In the terms of the analogy of trade as a more efficient productive process used above, reducing the flow of imports will also reduce the flow of exports. Less output requires less input. Clearly, the exporting sector must lose as the protected import-competing activities gain. But, more importantly, from this perspective the overall economy that consumed the imported goods must also lose, because the more efficient production process–international trade–cannot be used to the optimal degree, and, thereby, will have generally increased the price and reduced the array of goods available to the consumer. Therefore, the ultimate economic cost of the trade barrier is not a transfer of well-being between sectors, but a permanent net loss to the whole economy arising from the barriers distortion toward the less efficient the use of the economy's scarce resources.