Retaliatory laws can negatively impact interstate trade and business relations by triggering a ‘trade war’ where states enact increasingly protectionist measures against each other’s goods and services. This can lead to a fragmented national market, increased costs for consumers, and an overall decrease in economic efficiency.
For example: If State X raises taxes on goods from State Y in retaliation for State Y’s increased licensing fees on State X’s service providers, both states may end up escalating barriers to each other’s products, harming businesses and consumers alike.