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Tariffs and Politics: Evidence from Trump’s Trade Wars

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  • Fetzer, Thiemo

    (University of Warwick)

  • Schwarz, Carlo

    (University of Warwick)

Abstract

We use the recent trade escalation between the US and its trade partners to study whether retaliatory tariffs are politically targeted. We find comprehensive evidence using individual- and aggregate voting data suggesting that retaliation is carefully targeted to hurt Trump. We develop a simulation approach to construct counterfactual retaliation responses allowing us to both quantify the extent of political targeting, while also studying potential tradeoffs. China, appears to put a large weight on achieving maximal political targeting. The EU seems successful in maximizing political targeting, while at the same time minimizing the potential damage to its economy.

Suggested Citation

  • Fetzer, Thiemo & Schwarz, Carlo, 2019. "Tariffs and Politics: Evidence from Trump’s Trade Wars," CAGE Online Working Paper Series 407, Competitive Advantage in the Global Economy (CAGE).
    • Handle: RePEc:cge:wacage:407
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    Cited by:

    1. Sanyal, Anirban, 2023. "Caught in the Crossfire: How Trade Policy Uncertainty Impacts Global Trade," EconStor Preprints 272825, ZBW - Leibniz Information Centre for Economics.
    2. Blanchard, Emily J. & Bown, Chad P. & Chor, Davin, 2024. "Did Trump’s trade war impact the 2018 election?," Journal of International Economics, Elsevier, vol. 148(C).
    3. Liebman, Benjamin H. & Reynolds, Kara M., 2022. "Casualties of trade wars," European Economic Review, Elsevier, vol. 148(C).
    4. Timothy Besley & Thiemo Fetzer & Hannes Mueller, 2023. "How Big Is the Media Multiplier? Evidence from Dyadic News Data," CESifo Working Paper Series 10619, CESifo.
    5. Jaerim Choi & Sunghun Lim, 2023. "Tariffs, agricultural subsidies, and the 2020 US presidential election," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(4), pages 1149-1175, August.
    6. Ben G. Li & Yi Lu & Pasquale Sgro & Xing Xu, 2020. "Trump, China, and the Republicans," Discussion Papers 2020-26, University of Nottingham, GEP.
    7. Colantone, Italo & Ottaviano, Gianmarco & Stanig, Piero, 2021. "The backlash of globalization," LSE Research Online Documents on Economics 113860, London School of Economics and Political Science, LSE Library.
    8. Pablo D Fajgelbaum & Pinelopi K Goldberg & Patrick J Kennedy & Amit K Khandelwal, 2020. "The Return to Protectionism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(1), pages 1-55.
    9. Thiemo Fetzer & Ivan Yotzov, 2023. "(How) Do Electoral Surprises Drive Business Cycles? Evidence from a New Dataset," CESifo Working Paper Series 10584, CESifo.
    10. Nicholas D. Paulson & Allen M. Featherstone & Joleen C. Hadrich, 2020. "Distribution of Market Facilitation Program Payments and their Financial Impact for Illinois, Kansas, and Minnesota Farms," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(2), pages 227-244, June.
    11. Sergei Guriev & Elias Papaioannou, 2022. "The Political Economy of Populism," Journal of Economic Literature, American Economic Association, vol. 60(3), pages 753-832, September.
    12. James Lake & Jun Nie, 2022. "The 2020 US Presidential Election and Trump's Trade War," CESifo Working Paper Series 9669, CESifo.
    13. Che, Yi & Lu, Yi & Pierce, Justin R. & Schott, Peter K. & Tao, Zhigang, 2022. "Did trade liberalization with China influence US elections?," Journal of International Economics, Elsevier, vol. 139(C).
    14. Samar Ashour & David Rakowski & Salil K. Sarkar, 2021. "Currency risk exposure and the presidential effect in stock returns," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 45(3), pages 469-485, July.
    15. Sanyal, Anirban, 2021. "Impact of US-China Trade War on Indian External Trade," EconStor Preprints 242250, ZBW - Leibniz Information Centre for Economics.

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    More about this item

    Keywords

    : trade war; tariff; targeting; political economy; elections; populism JEL Classification: F13; F14; F16; F55; D72;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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