Updated: Aug 20, 2021

A policy change made to punish another firm or country for its actions. In a trade war, for example, country A retaliates to quotas on its exports to country B by imposing quotas on B’s goods. Distinguish between deliberate retaliation and policy changes which are simply a reaction to a worsening in country A’s position. If a fall in exports to country B worsens country A’s balance of payments, A may restrict imports for balance-of-payments reasons; while a fall in its exports injures country B, this is a side-effect rather than an objective of country A’s policy.

Reference: Oxford Press Dictonary of Economics, 5th edt.

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James Knight
Editor of Education
James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.