Every round of the current trade war forces the same choice. A government can chase prosperity, open markets, and let supply chains find the cheapest producer, or it can chase security, wall off strategic industries, and pay the price. Tariffs, export controls, and new economic security pacts demand that governments choose either wealth or power. The dilemma sounds like a product of the present, but it echoes a much older argument in economic history: whether wealth and power were ever really rivals. Three centuries ago, statesmen wrestled with a version of the same question, and one economist’s answer to it is still worth reading today.

Mercantilism, the body of trade doctrine that guided European statecraft before Adam Smith, has long been read by historians as a system organized around power, in which a ruler hoarded bullion and weakened his rivals to strengthen the state. At the same time, wealth served only as a means, the treasure that funded the fleets and the soldiers. That reading became the standard consensus: power came first, wealth second. But did the mercantilists actually treat wealth and power as rivals, or has that assumption said more about later interpreters than about the mercantilists themselves? In “Power versus Plenty as Objectives of Foreign Policy in the Seventeenth and Eighteenth Centuries,” Jacob Viner (Princeton University) challenges this consensus about mercantilism. Writing in the inaugural 1948 issue of World Politics, Viner argued that the mercantilists never ranked the two goals against each other; in their thinking, power and plenty were joint aims of national policy, each expected to reinforce the other.

Viner read the mercantilists more closely than earlier interpreters had, but he didn’t dismiss their critiques outright. He agreed that mercantilist writers treated wealth as a means to power, and that they overstate how much strength a full treasury could buy. But he pushed the original interpreter’s argument further. Could anyone actually point to a single mercantilist who called power the sole purpose of policy, or dismissed wealth as worthless apart from the weapons it bought? Heckscher, the historian whose work had established that power-first consensus, knew the sources well, yet he never cited such a line from a mercantilist, and Viner doubted one existed.

Viner’s investigation found that much of the evidence for the power-first reading was thin. Heckscher had leaned heavily on a single line from Colbert, the finance minister of Louis XIV, who wrote that trade is the source of finance, and finance is the sinew of war, the muscle behind every army. Read alone, that line does make commerce sound like a tool of the army. But Colbert also wrote that a good prince puts his subjects’ welfare first, and much mercantilist writing discusses trade and prosperity without ever mentioning war. Viner made a simple point about evidence like this. Silence cuts both ways. If Colbert believed finance was the sinew of war, he would just as easily have said that strength was the sinew of trade.

The mercantilists’ real error, Viner argued, was economic, not political. Many of them treated the world’s wealth as fixed, much like its stock of gold, so one country could only grow richer by making another poorer. Adam Smith mocked this view, in which nations treated a neighbor’s gains as their own losses and grew suspicious of trade that might otherwise have connected them, but a bad theory of wealth is not the same as a preference for power over wealth. Viner’s point was that the mercantilists misunderstood how nations grow rich, not that they cared more about strength than riches.

This is where Viner actually answers the question by rejecting the premise that a side had to be picked in the first place. Power and plenty, he argued, were joint aims that mercantilist statesmen expected to reinforce each other, and the language of the era backs him up. Phrases like “power and plenty,” “wealth and strength,” “profit and power,” and “profit and security” appear again and again in the poems, pamphlets, statutes, and war declarations of the time. Even Adam Smith, mercantilism’s harshest critic, granted that the great aim of a country’s political economy was to enlarge its riches and its power together.

Viner’s account has one important limit worth naming. He never claimed the two aims always lined up. Statesmen sometimes had to spend on defense money they could have put into trade, and they knew it. Most writers of the period thought the sacrifice paid off in the end, since a secure country was best placed to prosper. Smith later coined the harder line that “defense is more important than opulence,” opulence being Smith’s word for prosperity, a ranking the mercantilists themselves never put so bluntly. They would have said instead that defense and prosperity depend on each other, even when the two seem, for a time, to compete.

The false choice Viner rejected has not gone away. Talk of guns versus butter, the modern shorthand for choosing between military spending and domestic prosperity, assumes exactly the ranking of power over wealth that he showed the mercantilists never held. For them, the question barely arose, because a nation needed both wealth and power and pursued them together. Their real problem was economic: a zero-sum view of trade, the belief that one country’s gain always means another’s loss, which set nations against one another instead of connecting them. Viner closed his 1948 essay with a brief aside, noting that this faulty economics had poisoned relations between states, and that the harm had reached into his own time. Three-quarters of a century later, the same faulty economics is back in plainer view: tariffs, export controls, and “de-risking” pacts are all built on the assumption that a country must trade away either its wealth or its security. The mercantilists wanted their nations rich and strong at once. What outlived them, by three centuries and counting, is the belief that a country can only prosper by impoverishing its neighbors, and Viner’s answer- that the choice was never as real as it looked- is worth taking seriously the next time a government insists it has to be made.

Every four years, thousands of companies brace for the same event: a presidential election that could rewrite the rules they operate under overnight. Tax breaks might vanish, tariffs might appear, or existing regulations might flip. Firms can try to influence which candidate wins, but it turns out many of them have found another way to manage it, paying lobbyists.

A recent paper by Kristy Buzard, Nathan Canen, and Sebastian Saiegh (of Syracuse University, the University of Warwick, and UC San Diego) finds that firms that lobby experience significantly less anticipated stock market turbulence around elections than firms that don’t. Rather than relying on news coverage or surveys to measure this, the researchers built a new indicator from the options market, watching how investors themselves priced the uncertainty of individual companies in the days surrounding the 2020 presidential election. What they found is that the market treats lobbying firms as safer bets, and that this pattern holds up even after accounting for standard reasons some firms lobby and others don’t.

To measure firm-level political risk, the researchers resorted to a corner of the stock market that trades entirely on expectations: options. An options price reflects how much investors think a stock could move before the option expires, so by comparing options that expire just after the election to those that expire well after, the researchers could isolate how much volatility they were pricing in specifically due to the election. They ran this exercise for roughly 2,500 publicly traded firms with data pulled from OptionMetrics, then merged it with lobbying outlay records from the LobbyView database to see whether a firm had spent money trying to influence policy in the four quarters before the election (Q3 2019 through Q2 2020).

Firms that lobbied had “policy risk” scores 11.5% to 21.9% lower than the average firm in the sample. Policy risk is the researchers’ term for how much post-election turbulence investors expected in a firm’s stock price, estimated by comparing options prices in the days before the vote. Investors expected calmer waters ahead for firms that lobbied than for similar firms that didn’t. That gap held up even after the researchers controlled for size, industry, financial health, and dozens of other political variables like PAC contributions and revolving door hires. So, it wasn’t simply that lobbying firms happened to be bigger or more stable to begin with. The effect also grew with the size of a firm’s lobbying budget. The more money a company spent on lobbying, the calmer investors expected its stock to be. Firms that spent the most on lobbying saw about a 13.77% drop in anticipated post-election swings compared to firms that didn’t lobby at all.

The paper’s more interesting contribution explains why this pattern exists in the first place. Lobbying firms and non-lobbying firms are not identical to begin with. In the sample, lobbying firms tended to be larger, older, more profitable, and already more politically active than firms that skipped lobbying. That raises an obvious question. Maybe these firms simply look calmer to investors because they are bigger and sturdier, not because lobbying itself changes anything. To test this, the authors built a statistical model that accounts for the fact that firms choose to lobby only when they expect it to pay off. Even after doing this, lobbying was still linked to meaningfully lower anticipated volatility. If anything, the effect got larger once this selection process was taken into account.

From there, the paper turns to a bigger question. Why do only some firms bother lobbying at all? Since the 1995 Lobbying Disclosure Act, firms have had to publicly report how much they spend on lobbying. In this dataset, only about 32% of firms did so ahead of the 2020 election. To explain that gap, the authors build a model that treats lobbying like a costly bet. A firm has to pay a fixed cost just to enter the lobbying game, plus a variable cost that rises with how intensely it lobbies. Whether that bet pays off depends on what the authors call a firm’s “lobbying favorability,” essentially how much political access, connections, or existing privilege a firm can draw on. The researchers estimate the fixed cost at around $12,500, which lines up closely with what real Washington lobbying firms charge as a minimum retainer. They also find that the payoff from lobbying shrinks quickly. Each additional dollar spent buys progressively less protection.

This helps explain a longstanding puzzle in political science. Despite how much money appears to be at stake in Washington, most companies still choose not to lobby. The paper’s answer is that the payoff from lobbying is highly skewed. A small set of firms, generally larger ones with more to protect, see returns that clearly justify the cost. Everyone else looks at the price tag and decides to take their chances with the election instead. The authors are careful about the limits of their evidence. Because the study focuses specifically on elections, it does not capture other sources of policy uncertainty, like regulatory risk from federal agencies, that operate through different channels. Still, by tying a firm’s lobbying decision directly to a measurable drop in investor uncertainty, the paper offers a rare, quantifiable window into whether lobbying actually works.

The authors connect their findings to two bigger debates. The first is a longstanding puzzle in political science. If lobbying really buys this much protection, why doesn’t every firm do it? The skewed and quickly diminishing payoffs documented here help answer that. The second is the ongoing debate over restricting lobbying. If lobbying works like insurance against election related risk, then limiting it could leave firms, and by extension their shareholders and employees, more exposed to the swings of American elections, not less protected. For roughly a third of American firms, the ones with the most to protect, the market seems to agree that the insurance premium is worth paying.

Dear readers,
This week, we’re excited to introduce a new learning tool and coding project our lab has been working on! The U.S.-China Trade War Simulation teaches students how domestic politics shapes international bargaining through an active learning model. Students step into the middle of the 2018–2020 U.S.-China Trade War and experience firsthand the challenges of negotiating across both domestic and international political constraints.

In this post, we’ll walk through how the simulation works, how we’ve designed it to fit into the classroom, and what we learned building the web app that now brings it online. At the end, we’ve also attached a sample lesson plan for instructors interested in bringing the simulation into their own classrooms.

Interested in the research behind the simulation? We are also using the simulation as a research tool to study bargaining, issue linkage, and the conditions that contribute to bargaining failure. Our paper, “Issue Linkage and Bargaining Failure: Experimental Evidence from a Trade War Simulation,” examines the experimental data generated through the simulation and is currently under review. If you’d like to learn more about the research behind the project, you can read the print here.

At a Glance

· It works best for intro IR, IPE, U.S.–China relations, or bargaining courses.

· Expect about 2 to 4 class hours depending on format, plus 1 to 2 hours of prep.

· Runs in person, over Zoom, or as a hybrid.

· The class needs at least six students, though it works best with around twelve.

· Instructor prep is minimal. Just read through our briefing slide deck and get familiar with the web app.

· Students should do a short role briefing, watch the Frontline documentary, and can write an optional policy memo.

· All you need is a web browser. No special software required.

· It’s free.

· You can explore the simulation at simulation.tradewarlab.com.

How the Simulation Works

The simulation unfolds in two rounds.

Round 1, Domestic Politics. Students are divided into U.S. and Chinese teams. Within each country team, students are assigned to an interest group representing a different domestic constituency, either a Globalist, a Protectionist, or a National Security Hawk. Each group receives a policy document outlining its priorities, including which issues, such as tariffs, market access, and technology transfer, matter most to them. Groups then negotiate among themselves and aggregate their preferences into a position paper that becomes their team’s mandate for international negotiations.

Round 2, International Negotiation. Armed with that mandate, the U.S. and Chinese teams sit down across the table from each other’s negotiators. They bargain over a joint statement, trading asks and concessions on a shared points scale and trying to reach a deal before time runs out.

Why It Teaches Bargaining Theory

This structure is built around two foundational IR ideas, two-level games (Putnam) and bargaining theory (Fearon). In a two-level game, negotiators must simultaneously satisfy international counterparts and domestic constituencies. Bargaining theory asks why actors sometimes fail to reach agreements that would leave both sides better off than conflict. Fearon’s model was developed to explain military conflict, but the same bargaining logic helps students understand why mutually costly trade disputes can persist.

Every negotiator in a two-level game is effectively bargaining at two tables at once, one with their international counterpart, the other with constituencies back home. For most students, these are ideas first encountered as abstractions in an Introduction to International Relations textbook. Here, they get to experience them instead of just reading about them.

That experience is what makes the constraints of international bargaining tangible. The tension of international politics becomes apparent when the demands of a domestic coalition leave a negotiator with little room to make the concessions necessary to reach an international agreement. A bargaining range is easy to draw on a whiteboard, but much harder to locate when your own side refuses to move. Students watch their bargaining position take shape in real time, seeing how domestic constraints can narrow the potential range between two teams, and when negotiations end without a deal, they see firsthand how the disappearance of mutually acceptable agreements can lead to bargaining failure. In this way, the simulation transforms bargaining theory from an abstract concept into a problem students have to navigate themselves.

What the Web App Does for Instructors

Classroom simulations have a long history in international relations teaching, and for good reason. They’re one of the best ways to turn abstract concepts into something students actively experience. That’s not just an impression from the classroom. A recent experimental study tracking three years of an Introduction to International Relations course found that sections using simulations showed measurable gains in both engagement and objective academic performance compared to sections that used debates and discussions instead. But anyone who has run one knows they can also be a headache. Instructors have to distribute materials, track negotiations, calculate outcomes, collect student decisions, and make sense of it all afterward. We wanted to build something that took that burden off instructors’ plates, a tool they could pick up, run with their own students, and reuse semester after semester without reinventing the wheel each time.

The instructor dashboard handles the administrative work. Role assignments, bargaining positions, votes, scoring, and final outcomes are all recorded automatically, so instructors spend less time tallying points and more time facilitating the simulation and leading the debrief.

What running it actually looks like. Instructors create a class and get a unique class code to share with students, who use it to sign up and create their own accounts. From there, the instructor assigns each student to an interest group and country. There’s no random sorting, so you can build balanced teams or hand a role to the student best suited for it. Once assigned, you control when each round opens and closes, and can watch negotiations unfold live on a progress dashboard rather than circling the room guessing who’s stuck. Scores are calculated automatically the moment a deal is struck in Round 2. If a student is absent, you can simply pull them out of that round’s role play without disrupting the rest of the class, and separate class codes let multiple sections run their own simulations at the same time. When the negotiating is done, the debrief is where it all comes together, the moment the synthesis of active learning actually happens.

The app also comes stocked with everything needed to run a full lesson. That includes briefing documents for each interest group, an optional NotebookLM that students can query for background material, and a link to the Frontline documentary that originally inspired the simulation. Our goal was simple. We wanted to make something engaging for students and practical for instructors to actually use.

On data and privacy. Data handling is covered under our terms of agreement and IRB consent policy.

A Sample Lesson Plan

Instructors have asked how the simulation can fit into an existing syllabus, so here’s a four-part structure we’ve used with success.

One week before the simulation, assign roles. Students receive their interest group assignments and a week to research their role. We recommend having them write a short policy memo outlining their group’s priorities and potential concessions before Round 1. Here is a briefing slide deck we created to help your class prepare.

Trade War Simulation Prep Slides

657KB ∙ PDF file

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Class 1, Round 1, Domestic Politics. (~50 minutes.) Interest groups meet, negotiate internally, and aggregate their preferences into a team position paper.

Class 2, Round 2, International Negotiation. Teams sit down with the opposing country and bargain over a joint statement using the mandate they developed in Round 1.

Class 3, Debrief. Connect the simulation back to the real U.S.–China trade war and use the experience to reinforce foundational concepts in international political economy and bargaining theory. A few questions that work well to anchor discussion.

Did the two teams have a bargaining range?

Which domestic constituencies constrained negotiators most?

Did negotiators accept agreements that some members of their coalition disliked?

Why did some negotiations succeed while others failed?

How did your experience resemble or differ from the actual U.S.–China negotiations?

The structure is flexible, too. The core simulation can be completed in about two hours in a single extended class session, or spread across several standard 50- or 75-minute class meetings. We’ve also run it many times over Zoom, so remote and hybrid classes are no obstacle.

Want to Try It in Your Classroom?

You can explore the simulation at simulation.tradewarlab.com. We’ve also put together an instructor guide, student briefing materials, and a sample lesson plan. If you’re interested in using it in a course, or would like us to walk you through the platform, get in touch with the Trade War Lab.

Behind the Scenes: Building the App

Everything above is the view from the classroom. But building the platform that makes it possible was its own kind of negotiation, between what we wanted and what we could actually ship. Below, Henry, the student developer who built the app, reflects on what that process taught him.

The web app grew out of a problem we ran into with the original, paper-based version of the simulation, where groups of students split into different rooms to negotiate. It worked, but it created real headaches for instructors. Tracking each team’s progress was difficult, collecting data afterward meant hours of manual work, and the whole format assumed everyone could be in the same room. As we ran more iterations, including remote versions over Zoom, those limitations became harder to ignore. Eventually it was clear that instead of forcing an existing platform to fit the simulation, we needed to build our own.

That gave us control over every part of the experience, letting us change the rules, adjust the interface, and respond directly to what we learned from each round of testing. The app runs on Vercel, Next.js, and Supabase, a stack simple enough for a small team (essentially one developer) to build and maintain while Supabase handled authentication, real-time updates, and the database behind the scenes.

Since we’re a research lab, though, the app also had to make the simulation easier to study. We built it to automatically record student decisions and the values they assign to different trade items, with everything exportable as a CSV. We also made final votes anonymous after early testing showed students were less likely to reject a bad deal when their name was attached to it. Anonymity lets students vote their actual judgment instead of caving to whoever negotiates the loudest. They can still see whether a deal passed unanimously, just not who voted which way. These priorities shaped the technical choices, too. We wanted the app to feel professional without becoming one more piece of software students and instructors had to learn. That’s part of why we chose Supabase’s relational structure over something like MongoDB. The simulation itself is inherently relational, with teams, interest groups, trade items, proposals, votes, and outcomes all connected to each other, so a relational database could handle those relationships directly instead of us recreating them throughout the app.

Building it wasn’t as clean as the plan made it sound. One particularly frustrating bug had students seeing final scores for both teams, but wildly skewed. After a lot of digging, the culprit turned out to be Supabase’s row-level security, not the scoring logic at all. Specific database policies were quietly blocking certain users from the rows with the correct point values. A good reminder that the most frustrating bugs aren’t always in the code you suspect. That bug, and plenty of others, reinforced our biggest lesson. You learn full-stack development fast once real people start using what you built. Beta testing surfaced problems that hours of solo testing never would have. Features that felt obvious to us confused first-time users, and workflows that worked fine with two test accounts broke the moment a whole class used them at once. We also learned a development plan can almost never be too detailed. It’s far easier to think through constraints up front than to reconstruct those decisions after something breaks, and a detailed plan makes it much easier to tell which features genuinely improve the simulation and which just add complexity.

In a way, building the app became an extension of the simulation itself. We wanted students to feel the real complications of bargaining, and building the software made us navigate our own version of the same tradeoffs. Simplicity versus flexibility, research versus teaching, what we wanted to build versus what we could realistically ship. What started as a paper-and-pencil classroom exercise is now a teaching tool, a research platform, and an ongoing coding project we keep developing alongside the instructors and students who use it.

Picture a firm that finds out which of its imports are about to get hit with a new tariff, weeks before that tariff list becomes public. Is that just good instinct, or is the firm lobbying specifically to find out that information? Lobbying is usually framed as a tool for influencing policy outcomes, and most of what happens behind closed doors stays invisible to the public. Firms don’t only lobby to sway policy decisions. They also lobby to learn things, and if that means gaining access to nonpublic information, it can raise real ethical or even corruption concerns. During a trade war, that kind of early intelligence can be just as valuable as a tariff exemption, since it lets a firm adjust its supply chain before the rest of the market catches up.

A recent paper and policy by Bo Yang (University of Hong Kong) sets out to answer whether firms lobby specifically to gain early insight into pending trade policy and then use that insight to move faster than everyone else. Yang finds that lobbying firms increased their imports of products that would later be tariffed, before those tariffs were even announced. He argues this happened because lobbying gave these firms early insight into which products were likely to be targeted, letting them stockpile strategically instead of scrambling once tariffs took effect. That early advantage paid off twice. It let firms adjust their supply chains ahead of time, and it reduced how often they later needed to lobby again to request costly tariff exemptions. These effects have implications for the regulation of lobbying activities, and align with growing public demand for more clarity on corporate political influence

Accordingly, Yang builds the analysis around the theory of information-seeking lobbying. The argument is that information gained through information-seeking lobbying gives firms a strategic market advantage. If that’s true, lobbying firms should stockpile selectively rather than broadly. They should be more likely to stockpile non-List 1 products that would soon be added to a tariff list, since they’d know those products were coming, and less likely to stockpile products that would remain untargeted or only be tariffed much later, since there’d be no reason to rush on those.

Yang focuses on 2018 Q2, the window bookended by the United States Trade Representative’s announcement and rollout of three lists of tariffed Chinese products between April and September. To gather the data, he analyzed bills of lading records from the FactSet Shipping Transactions database, tracking Chinese imports for 717 US companies from January 2017 to September 2018. Cross-referencing this against all four USTR tariff lists showed which products were tariffed and when. Lobbying activity came from the LobbyView database, where firms’ public disclosures made it possible to separate trade-related lobbying from everything else. That distinction turned out to be important. Trade-related lobbying jumped from 3.9% of all lobbying issues at the end of 2017 to 5.0% once the trade war began in Q3 2018, and lobbying specifically about China rose even more sharply within that, from 7.7% in Q4 2017 to 27.6% by Q3 2018. Yang also drew on voluntarily disclosed trade association memberships and data from the Center for Political Accountability to gauge how effective collective lobbying was compared to firms acting alone.

Yang’s firm-product-month data shows that in 2018 Q2, lobbying firms imported 93%-161% more non-List 1 products than firms that didn’t lobby. That gap disappeared the moment tariff lists were publicly announced, which rules out the possibility that lobbying and non-lobbying firms simply had different stockpiling habits to begin with. The pre-trade-war data backs this up too. There was no meaningful difference in import volume between the two groups before the war, and lobbying firms weren’t already importing more List 2 or List 3 products before March. This suggests that firms lobbying for policy information during that pre-announcement window had a real edge in deciding what to stockpile. That edge paid off again later: lobbying firms went on to file fewer tariff exclusion requests for the exact products they’d already stockpiled, sparing them a second round of costly engagement with the government. However, lobbying through trade organizations wasn’t nearly as effective at producing this stockpiling advantage as lobbying done by individual firms.

Beyond the legal and ethical questions this raises, and the public’s general distaste for backroom dealings between corporations and politicians, this pattern also threatens market competition. Larger firms invest more heavily in lobbying than smaller ones do, which hands them an information edge their smaller competitors simply don’t have. Yang’s proposed fix is to tighten lobbying disclosure rules, specifically requiring firms to report the actual purpose of their lobbying activities, not just that it happened.

China is the United States’ largest trading partner, and yet the two countries are in the midst of a trade war. As the Council on Foreign Relations states, “Economic tensions between Washington and Beijing have risen steadily over the past two decades as U.S. policymakers chart a progressively assertive course toward China.”1 This has become ever more prevalent today, with rising prices and pushes to diversify by the current administration.

A recent article by Bo Yang (University of Hong Kong), Jinyuan Song (George Mason University), Yifan Wei (Simon Fraser University), and Jing Li (Simon Fraser University) finds that even amid political pressure, both strategic and nonstrategic firms continued adding suppliers in China, with strategic firms adding new suppliers more slowly than nonstrategic firms. Importantly, political pressure still impacts firms, but they’re more inclined to stay if they gain significant revenue from China or rely heavily on Chinese suppliers. For these firms, walking away costs more than it’s worth, and that economic cost can outweigh the benefit of staying in the U.S. government’s good graces. The authors argue that the number of Chinese suppliers an American firm keeps is shaped both by its political leaning, with Republican-leaning firms derisking more, and by its concentration of supply networks and revenue derived from China. These patterns, they argue, are best explained by a legitimacy-efficiency tradeoff.

To investigate the issue, the researchers built their analysis around the legitimacy-efficiency tradeoff. Firms experience political pressure from home governments to derisk. If they don’t, they risk delegitimization, which can mean losing government contracts, financing, and research access. However, firms also have economic factors incentivizing them to stay in rival countries, from their revenue earned in that rival countries, to a high dependence on their rival country’s supply network. Ford’s decision to license Chinese technology for its U.S. electric vehicle battery plant demonstrates this tension. Ford’s move defied the push to diversify away from China, triggering months of congressional investigations and putting its eligibility for EV tax credits at risk. That’s the legitimacy-efficiency tradeoff at work: chasing one often means sacrificing the other, and Ford’s case shows just how costly that choice can be.

The research team conducted an observational study using data from the FactSet Revere Supply Chain Relationships database. Of the 513 firms in the sample, 138 firms in strategic industries served as the treatment group, and 245 comparable firms in non-strategic industries served as the control group. Using this data, they employed a DID Model, a method that compares how the treatment and control groups changed over time, to examine firms’ adjustments due to political risks. The model has two independent variables, Strategic Industries and Post-2017. Together, these create an interaction term that captures the heightened geopolitical risk strategic firms faced after 2017. Moderating variables include Share of Donations to Republicans, Share of Revenue from China, and Number of Sourcing Countries. Number of Chinese Suppliers serves as the dependent variable.

The authors’ results supported their legitimacy-efficiency tradeoff argument. The gap in the number of Chinese suppliers between strategic and non-strategic sectors was more pronounced after 2017 than before it, suggesting that a firm’s status as strategic or non-strategic shapes its diversifying decisions. However, a firm’s sector isn’t the only factor that shapes its decision. Between 2017 and 2020, during the first Trump administration, Republican-leaning firms in strategic industries were more likely to derisk by removing supply chain reliance on China than similar Democratic-leaning firms, reflecting their differing opinions on China at the time. After Biden took office, firms in strategic industries of all political leanings were more likely to diversify, reflecting a converged view on China across parties.

Economic incentives also factor into a firm’s decision to derisk. Since firms tend to source from countries where they generate significant sales, higher revenue from China made firms less likely to cut Chinese suppliers, even in strategic industries. Along the same lines, the difference in Chinese suppliers before and after 2017 was less pronounced among firms with a less diversified supplier network.

The findings suggest that firms will continue to balance legitimacy and efficiency, ultimately choosing what is best for their economic success. As this study shows, that balance shifts with the political moment firms exist within. Firms lean toward legitimacy when the political cost of staying tied to China is high, and toward efficiency when the economic cost of leaving is higher still. However, the implications of this paper go far beyond the business realm. While the legitimacy-efficiency tradeoff described here is limited to firms, it could plausibly extend to consumers as well, showing up as higher costs, limited access to materials, and slower innovation. Geopolitical tensions, in other words, don’t stop at the boardroom; they eventually reach the consumers who rely on the firms caught in the middle.

When political tension rises between nations, the effects are rarely contained within the government: they quickly reach the ears of multinational corporations (MNCs). Following President Chen Shui-bian’s 2002 “One Country on Each Side” (OCES) speech, tensions between China and Taiwan escalated quickly. Taiwan’s stock market dropped 5.77% in a single day,1 and Beijing warned the speech was “pushing Taiwan into war.”2 MNCs faced uncertainty over whether the tension would disrupt their supply chains. This article examines how MNCs respond to political tension, and why some firms adjust their trade strategies far more than others.

A recent paper by Fanying Kong (University of International Business and Economics, China), Shengqiao Lin (University of Toronto), and Xuan Wang (Peking University) examines how MNCs adjust trade strategies during political tension. The authors argue that political tension alone, even without any actual military conflict, creates enough uncertainty to push firms into ‘de-risking’: cutting back on suppliers from the tense region so they’re not caught off guard if trade gets disrupted.

To explain why multinational corporations respond differently to political tensions, researchers began with a straightforward theory. Firms adjust their strategies according to the risk they face, and as geopolitical tension rises, companies worry about supply chain disruptions and may reduce trade with risky regions. However, the researchers argue that not every firm assesses that risk the same way, depending on two mechanisms.

The first is supply chain connectedness. Firms that rely heavily on suppliers from a politically risky region, have geographically concentrated supply chains, or use imported goods for further processing face more exposure because they’ve invested more heavily in those relationships. For instance, two firms might each get 70% of their imports from Taiwan, but if one sources the remaining 30% from five different countries while the other relies on a single supplier, the latter has far fewer alternatives if trade is disrupted. Firms that use imports in processing also have higher sunk costs, since their production lines are built around specific suppliers, making adjustment expensive.

The second is home connections. Firms with investment origins in the risky region tend to have stronger relationships, more trust, and better information on local conditions, all of which reduce uncertainty. That makes Taiwan-invested firms less likely to change their trading behavior even as tensions rise.

From this, the researchers proposed three hypotheses. MNCs reduce imports from a host country’s adversarial regions during political tension (H1). That reduction is larger for firms more reliant on suppliers in those regions, more concentrated in their sourcing, or trading final goods rather than processed ones (H2). And MNCs invested in the adversarial region itself are less likely to cut imports, since those ties act as a buffer (H3).

To test these, the researchers analyzed over 1.4 million import transactions from 20,854 foreign-invested firms in mainland China between 2001 and 2003, drawn from multiple government databases and tracking import values, supplier locations, investment origins, and whether goods were used for processing. Using synthetic control and difference-in-differences methods, they compared Taiwan imports before and after the OCES speech against imports from other countries. Taiwan was an ideal test case. As Table 1 shows, it was China’s second-largest import partner at the time, at 15.16% of total imports, right behind Japan.

Running these models against the data, the researchers found strong support for their hypotheses. After the OCES speech, MNCs cut imports from Taiwan by roughly 8% relative to the expected trend (Figure 2), and firm-level estimates landed in a similar 7.13%-9.62% range across models. Firms heavily reliant on Taiwanese suppliers saw larger declines, while processing-trade firms cut imports about 9.8% less than firms buying finished goods, confirming the sunk-cost logic behind embeddedness. And home connections mattered: non-Taiwan-invested firms cut imports by about 8.9%, while the effect on Taiwan-invested firms was statistically insignificant, meaning those relationships genuinely buffered firms from the shock.

In a moment of rising geopolitical competition, this study shows MNCs make decisions based on political risk as much as profit. Firms adjust supply chains depending on their exposure to uncertainty and their embeddedness in risky regions, while home connections let some firms ride out tension that hits others harder. That means political conflict can reshape trade long before sanctions or military action ever occur, and it makes firms worth studying as political actors in their own right, not just economic ones.

This pattern keeps appearing. For example, after U.S. House Speaker Nancy Pelosi’s 2022 visit to Taiwan, Taiwan’s exports to China fell 4%, then another 21% in 20233, while many Chinese firms opened operations in Mexico to hedge against exactly this kind of risk.4 As global supply chains grow more entangled with geopolitics, the harder question is what this de-risking looks like over the long run. Are firms permanently restructuring where they source from, or just pausing until tensions cool? The researchers note their data captures trade volumes but not the full architecture of firms’ supply networks, leaving that question for future work.

Do corporations care about the reputations of countries they conduct business with? When Russia invaded Ukraine, Russia faced widespread condemnation from citizens and the media, followed by economic sanctions from numerous foreign governments. Despite the economic and social pressure, some foreign-invested firms (businesses with at least 10% foreign ownership) remained in Russia, including PepsiCo and Nestle. Why did some firms stay and others leave? Furthermore, are nations able to weaponize and use their multinational corporations as tools to economically pressure other countries?

These inquiries are addressed in the recent paper, Exiting Russia, by Rachel Wellhausen (University of Texas at Austin) and Boliang Zhu (Pennsylvania State University). Examining the variables influencing a firm’s decision to stay or leave, they found that foreign-invested firms in consumer-oriented industries and those under Russian managerial control faced more pressure to exit, while firms in industries critical to Russia’s economy were less likely to leave. To explain this, they argue that Foreign Direct Investment (FDI) exit should be seen as a transaction: firms weigh what’s at stake (reputation, customers, punishment) if they don’t sell against what they give up if they do (selling at a loss, sunk costs, a foreign market).

FDI matters because in an integrated global economy, capital doesn’t just vanish quietly, its sudden removal can disrupt whole economies. While there’s a wealth of literature on why firms enter foreign markets, almost none exists on why they leave, and what little does treats exit as expropriation: the host state seizing or forcing a sale. Wellhausen and Zhu argue that framework doesn’t fit Russia. Rather than expropriating firms outright, Russia mostly let capital leave through voluntary sales, shaped by pressures like consumer opinion, home-state politics, and worsening economic conditions, and by firm traits like hard-to-move assets, industry importance to Russia, and how much domestic managers already controlled.

As seen in Table 2, the authors split their variables into two buckets: pressures to sell and terms of the sale. They expected firms to be more likely to exit if they were from “unfriendly” states (H1a), named on public praise-and-shame lists (H1b), in consumer-oriented industries (H1c), or majority-owned by Russian shareholders (H2a), and less likely to exit if they were in industries critical to Russia’s economy (H2b) or industries with more fixed assets (H2c). To test this, Wellhausen and Zhu built a list of 42,720 foreign-invested firms active just before the invasion, then checked 18 months later whether their foreign investors still held meaningful control. Each hypothesis got its own measure: Russia’s own “unfriendly” list for H1a; matches against name-and-shame lists for H1b (16.3% of firms); U.S. advertising spending as a stand-in for consumer orientation for H1c; majority Russian ownership as a proxy for managerial control for H2a; a 2008 Russian “systemically important” firms list to flag strategic industries for H2b; and U.S. industry data on fixed-asset intensity for H2c. They also controlled for factors like whether a firm’s home state was Cyprus, had an investment treaty with Russia, or was state-owned.

Wellhausen and Zhu’s hypotheses produced mixed results, but almost every variable had a significant effect on firm behavior, whether or not it matched their prediction. Over the 18-month period, the exit rate for the 42,000 firms studied hit 33.3%, up from a pre-invasion rate of 25.3%, though most of that exodus wasn’t firms shutting down: just 5.4% went inactive, while 27.9% stayed active under new ownership. To make sure this spike was actually tied to the invasion and not some other trend, the authors ran a placebo test against Russia’s 2014 annexation of Crimea. H1a (unfriendly home state) and H1b (name-and-shame) were both proven wrong, with firms actually 0.5-3.3% and 4.7-5.6% less likely to exit, respectively. H1c (consumer-oriented industry) and H2a (Russian managerial control) held up, with firms 3.8-4.8% and 5.9-6.2% more likely to exit, respectively. H2b (Russian strategic industry) held up too, but in the other direction: firms in strategic industries were 4.1-4.3% less likely to exit, exactly as predicted. H2c (high fixed assets) had essentially no effect, raising real questions about how much weight asset mobility actually carries in firms’ decision-making.

Wellhausen and Zhu’s article pushes back on the FDI literature to argue that exit should be viewed differently: as a transaction weighing a seller’s pros and cons against how much a firm’s departure would cost the host state, and thus how hard that state will fight to keep it. Their mixed results suggest that while nations can try to prevent firms from leaving through means short of expropriation, like making exit costly for firms critical to their economy, they ultimately cannot reliably weaponize their firms against other countries the way they might wish. A firm’s home nation pressuring it to leave simply isn’t the most important factor in that firm’s decision. But if home states keep pushing firms to become more footloose and quicker to exit, will that undermine other host states’ confidence in FDI as a reliable development tool? That question needs more work to answer, but for now, Wellhausen and Zhu contend that “FDI is at best an imperfect tool of economic statecraft.”

When countries clash today, they increasingly reach for economic sanctions rather than weapons. One of the biggest users of this strategy is the United States, which imposes more sanctions than any other country. Although this is true, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), the federal agency that administers and enforces U.S. economic sanctions, has limited resources and needs to enforce sanctions in the most effective and cost-efficient way possible. Based on the evidence gathered, it’s argued that this enforcement approach targets high-profile firms, visible ‘whales’ generates more deterrence per enforcement action than pursuing many smaller violators.

A recent paper by Keith A. Preble (Miami University, Oxford) and Bryan R. Early (University at Albany, SUNY) finds evidence that shows the OFAC enforces sanctions by focusing its efforts on giving larger penalties for high-profile compared to low-profile firms. Specifically, large penalties occur with foreign high-profile firms. They theorize that this is due to high-profile firms having large reputations that, with this naming-and-shaming policy, would prompt mass media coverage and lasting reputational damage to the companies being targeted. The authors argue that the media attention generated by these actions is meant to create a ripple effect, with other, smaller companies adhering to the sanctions to avoid the same fate reported on. These findings, gathered by the researchers, show how the U.S. has been enforcing company sanctions with the limited resources of the OFAC.

To investigate their question the researchers first theorize that the U.S. is more likely to inflict larger penalties on high-profile firms, rather than low-profile ones. Secondly, they theorize a ‘name and shame’ effect, where publicizing a fine against a well-known firm materially harms its reputation, translating into lost investor confidence and weakened business relationships. This is believed to be the strategy of the OFAC due to the cognitive heuristics of availability bias and probability neglect. Due to availability bias, if high-profile firms are to be reported more often than low-profile firms, it means smaller companies are more likely to remember or hear about these instances, which may create fear among them. The probability that they, as low-profile firms, will be fined is low compared to high-profile firms; however, due to probability neglect, though, the companies still fear penalties against them and change their actions in order to avoid the possibility.

To test these two theories, the researchers gathered data on 207 firms, both foreign and domestic, and separated them by the level of profile of each firm. The researchers then went on to calculate, on average, how much the firms were fined, shown in Table 2a and Table 2b. To test their second theory on media traction on high-profile companies, the researchers used LexisNexis to gather the number of news reports made on a high-profile firm, Berkshire Hathaway, that was fined $4.14 million, and compared it to a low-profile firm, Generali Global Assistance, that was fined $5.86 million (Figure 3).

In Table 2a and Table 2b, the data show a large difference in the costs of repercussions faced by low-profile firms and high-profile firms. High-profile domestic firms were fined about 6 times more than their low-profile counterparts, and high-profile foreign firms were fined about 18 times more. This table shows that not only are high-profile firms fined a greater cost than low-profile firms, but it also shows that foreign firms are fined more than domestic, due to foreign firms requiring higher penalties in order to gain media attention in the U.S. In order to explain why high-profile firms are fined more than low-profile ones, the researchers used the gathered data from LexisNexis, seen in Figure 3. Figure 3, which compares the number of news reports made over a high-profile firm, Berkshire, being fined in comparison to a low-profile firm, Generali, shows that Berkshire had 113 more reports made than Generali’s 7 reports, despite the fact that Berkshire was fined about $1.7 million less than Generali.

This data shows the tactics used by OFAC to enforce government sanctions on companies. Due to the limited resources granted to the OFAC, achieving maximum compliance with minimal action is important, as seen in who they target. High-profile firms are being fined at a significantly larger amount than low-profile firms, in order to foster as much media attention as possible. This action is intended to damage the company’s large reputation, with lasting effects. At the same time, the authors argue that the media coverage gained from these actions is meant to push lower-profile firms to change their ways in order to adhere to sanctions, due to the fear of being met with the same repercussions. Although evidence shows the theories created seem to be true, the actual after-effect isn’t reported in the paper. Whether or not smaller firms change their actions due to high-profile firms being targeted has yet to be proven. Instead, the behavioral response is inferred from the heuristics of availability bias and probability neglect. So while Preble and Early show that OFAC does target high-profile firms with larger fines, the paper doesn’t directly test whether that strategy actually changes how other companies behave, which is a link future research would need to confirm.

Economic sanctions are a frequently used alternative to military force, a way for governments to pressure foreign countries by imposing economic costs rather than deploying troops. They are meant to make the targeted country pay a high enough price that it changes its behavior, but they rarely affect only the target. They can also disrupt businesses in the sanctioning country that depend on trade relationships with the sanctioned country. Scholars have long been deliberating whether sanctions actually work, but far less attention has been paid to how these firms respond when their own government’s policies threaten their operations. Do companies back sanctions for the national interest, or do they push back when their profits are at stake? This article looks at US firms that lobbied Congress over sanctions on Russia, and finds that the firms most deeply embedded in Russian supply chains were the ones most likely to lobby against the sanctions.

According to a recent paper by Lingbo Zhao (Pennsylvania State University), corporations’ decisions to lobby against economic sanctions are driven far less by loyalty to U.S. foreign policy than by their own economic ties to Russia. In particular, firms whose exports relied on Russian inputs were especially likely to oppose sanctions. When sanctions threaten to disrupt supply chains, foreign investments, or imports, corporations are far more likely to lobby against the legislation before it even passes. This finding challenges the assumption that domestic corporations will support their government’s foreign policy regardless of cost, highlighting instead the tradeoffs firms weigh between national interest and economic burden, and raises questions about the extent to which private economic interests influence the success of sanctions.

To figure out why corporations opposed sanctions, Zhao built an original dataset of U.S. firms that lobbied on bills proposing economic sanctions against Russia between 2014 and 2022, a period that included three major waves of sanctions tied to Crimea, election interference, and Russia’s invasion of Ukraine.

By comparing federal lobbying records with a sample of about 48,000 large U.S. firms, Zhao examined three specific ways a company might have financial ties to Russia: how dependent its industry was on Russian supply chains, whether it had subsidiaries operating in Russia, and whether it purchased goods directly from Russian companies. To avoid using data already affected by earlier sanctions, Zhao used 2013 as a baseline and then conducted additional analyses to estimate the likelihood that a firm would lobby at least once during the period studied.

All three of Zhao’s hypotheses were supported by her findings. Companies in industries that depended on Russian materials or goods to continue operation showed significantly higher rates of lobbying. At the individual company level, having a Russian subsidiary or importing from Russia were both predictors of lobbying activity, with direct imports having a particularly large effect. To ensure the findings were not merely showing that large companies tend to lobby on everything, Zhao conducted a placebo test. The same Russia-related business practices did not predict lobbying on domestic issues such as taxes or labor policy. Ultimately, the results showed that firms responded to specific threats that depended on their operations.

Governments often think of sanctions as a straightforward tool of foreign policy to pressure foreign governments, but Zhao's research demonstrates that they can produce unintended consequences for businesses in the countries that impose them. U.S. firms with substantial investments, trade, or supply chain connections to sanctioned states are more likely to lobby against sanctions that threaten their own operations. Although Zhao does not determine whether this lobbying actually weakened sanctions, her findings suggest that firms could have an influence on how effective sanctions ultimately are. The study provides an excellent illustration for how the globalization of production complicates governments' ability to pursue foreign policy objectives without imposing costs on their own economies.

Industrial hubs have long been understood as sites of economic strength and growth in the United States, but over the last 20 years, these areas have absorbed a disproportionate share of the country’s job losses. Conventional wisdom among scholars holds that economic pain pushes voters left, toward candidates who promise to address those losses. Yet when analyzing voter behavior from the 2000 election of George W. Bush to the 2016 election of Donald Trump, experts observed the opposite: the regions hit hardest shifted sharply to the right. There is ample evidence that Trump tapped into working-class resentment amid globalization, but existing research can’t explain why a similar shock would push one region right and another left.

A recent paper by Sung Eun Kim (Korea University) and Krzysztof Pelc (Oxford University) offer an answer. An industrial hub is a region heavily specialized in one industry relative to the rest of the country, such as Detroit in the automobile industry. The political fallout of a shock, they argue, depends on whether the lost jobs were in one of these concentrated hubs or in a more diffuse industry not tied to any single place. The same shock pushes a hub region to the right and a diffuse-industry region to the left. The difference is identity: in a hub, social and professional networks overlap so completely that the community’s sense of itself is bound up in the local industry, so its decline registers not as a lost paycheck but as a threat to who the region is. Right-wing populists, who speak to nostalgia and lost standing, are best positioned to capture that grievance.

Take Clyde, Ohio, where families have worked at the Whirlpool plant for five generations, and most residents have childhood friends on the line. When the jobs go, the loss strains the whole community, its churches, schools, and sports teams, and strips the town of the industry that defined it. Where pain is scattered across many industries, the left’s redistributive message can address it; in a concentrated hub, it is the right that turns nostalgia and cultural loss into votes.

To test this, the authors identify hubs using commuting zones (counties linked by where people live and work) and cluster mapping, which sorts industries into related groups like automotive and textiles. A region counts as a hub for an industry only when that industry is both unusually concentrated there, and the region’s most distinctive. They measure economic pain with Trade Adjustment Assistance (TAA) petitions from 2000 to 2015; the claims workers file for relief after losing jobs to trade. Because each petition names an industry and a location, the authors split the shock into the part that hits a region’s hubs and the part that hits its non-hubs, which lets them compare equal-sized shocks across the two. They pair this with three original surveys of more than 7,300 Americans, probing peer networks, perceptions of regional standing, and appetite for populist leaders, and, following Autor and colleagues, with the change in each county’s Republican vote share between 2000 and 2016.

The results line up. Residents of hub regions are far more likely to hold politicians responsible for downturns: on a 0-to-10 scale, 10 more TAA petitions per 1,000 workers in a hub industry raise that belief by 0.12 to 0.13 points, compared with just 0.02 in non-hubs. Peer ties drive this: a one-standard-deviation increase in the number of high-school classmates working in your industry lifts that same score by about 0.55 points, an effect roughly as large as belonging to a union. The same shock erodes people’s sense of their region’s standing more sharply in hubs, a 0.1-point drop versus 0.04, an effect that holds even after accounting for how people rate their own personal status, so the loss is regional, not just personal. And those who feel their region has fallen behind are markedly more drawn to populist leaders, while personal status shows no such pull.

At the ballot box, the pattern completes itself: in a concentrated hub industry, ten more laid-off workers per 1,000 is associated with a 0.38 to 0.49 percentage-point increase in support for Trump in 2016, while the same shock to a diffuse industry pushes voters toward the Democrats.

The throughline is clear: an economic shock’s political fallout depends on whether it hits an industry on which a region is built. In a tightly connected hub, the loss isn’t just to wallets but to the institutions and identity that hold a community together. That is why checks alone fall short. Person-based relief like Social Security and Medicaid steadies individual incomes, but it can’t restore what a community loses when the industry that defined it disappears. Repairing that kind of damage takes place-based support: investment in local industry and infrastructure, not just mailed checks. Economic hubs always have the potential to make an outsized impact on the people who live within them. Whether that impact is job growth spurred by investment or a surge in populist sentiment depends on where the shock lands.

Blaming China has become one of the few things Democrats and Republicans agree on. Donald Trump built a political brand around it. Joe Biden kept Trump’s tariffs in place and added new ones on Chinese EVs, solar cells, and steel.¹ By 2024, 171 campaign ads for congressional or presidential candidates mentioned China.2 The prevalence of this rhetoric raises an important question: What benefits do politicians reap from using anti-China rhetoric? More specifically, is it possible that pointing the finger at Beijing lets politicians off the hook for domestic failures?

As a research assistant for the KU Trade War Lab, I worked on a project that used two waves of KU Trade War Lab survey data to test whether using rhetoric that frames foreign rivals as the cause of American problems shifts blame away from US politicians, or simply causes people to blame both geopolitical rivals and domestic political actors. The survey experiment employed 2,578 U.S. adults combined (1,218 in 2020 and 1,360 in 2025) and randomly assigned respondents to see either China or Japan on a select-all blame attribution question asking who is responsible for the country’s current economic problems, with Japan serving as the control. Respondents could assign blame to the president, Republican Congress, Democratic Congress, Canada, Mexico, China or Japan, corporations, unions, or no one, and they could select as many targets as they wanted. From these responses, I constructed four outcomes: Foreign (selecting at least one foreign actor), Domestic (at least one domestic actor), Both, and No one.

The preliminary results support the theory that blaming foreign rivals “spreads” political blame attribution rather than “shifts” it to foreign actors alone. The share of respondents who named at least one domestic actor barely moved, sitting 1.8 percentage points lower in the China group compared to the Japan group in 2020 and 0.7 points higher in 2025, and neither difference was statistically distinguishable from zero. Having the option to name China raised foreign blame by 18.4 percentage points in 2020 and 8.1 percentage points in 2025 relative to the Japan condition. The “Both” category, respondents who blamed foreign and domestic actors simultaneously, also rose sharply when respondents were given the option to blame China, by 15.6 percentage points in 2020 and 7.8 in 2025. Voters who saw China on the list blamed foreign actors at much higher rates than those given the option to blame Japan, but did not reduce the blame they placed on the president, Congress, or any other domestic target. They added a target without subtracting one.

The partisan breakdown tells an interesting story about how the effect of being presented with the option to blame China effects people’s tendency to attribute domestic problems to foreign actors. In 2020, Republicans drove nearly all of the foreign blame effect. Having the option to name China increased Republican foreign blame by 30.8 percentage points relative to Republicans who saw Japan, a far larger increase than among Democrats or Independents, and this difference was highly significant (p<.001). By 2025, that partisan gap had largely closed. Naming China as a potential cause of domestic problems now raises foreign blame attribution among Democrats, Independents, and Republicans by roughly the same amount. This may reflect the normalization of U.S.-China conflict across both a Democratic and Republican administration. Anti-China rhetoric is no longer a distinctly Republican signal.

My preliminary finding that naming China spreads blame rather than shifts it has consequences for how we think about democratic accountability. Politicians who blame China may not be successfully deflecting responsibility for economic outcomes. Instead, they could be expanding the set of actors that voters hold responsible without reducing the pressure on domestic leaders. The added effect of naming China was smaller in 2025 than in 2020 (8.1 versus 18.4 percentage points), which may suggest that the larger 2020 effect owed much to the COVID-19 pandemic, when China was front-of-mind as the origin of the virus, and that by 2025 the effect of the pandemic had faded, but anti-China rhetoric was still strong enough that people blamed the country for domestic issues. The core pattern that respondents tended to blame China along with domestic actors held across both waves and across five years of very different political environments.

This project could be improved in several ways. The two waves are not identical samples, so comparisons over time partly reflect differences in who responded. The blame measure is also a single select-all item, which captures whether respondents name an actor but not how strongly or why. Future work could examine which domestic actors absorb blame alongside China and test the patterns across education as well as party.

The Small Yard Problem: How America and Japan De-Risk from China - CELIS Institute - Investment Screening | National Security | Competitiveness.

China’s rise and fears of weaponized interdependence are causing democracies to rethink the relationship between their trade policies and national security. Are semiconductors and rare earths important to national security? How about garlic imported from China? Legislative efforts in the United States have proposed each item is worthy of de-risking and highlight the growing scope of the economic security debate. The 117th Congress saw the CHIPS and Science Act and other landmark industrial policies. Later in 2023, Senator Rick Scott sent a letter to the Commerce Department warning that Chinese garlic, grown, as he put it, “in sewage,” had no place in American grocery stores. Surely enough he would propose a bill that would limit the imports of Chinese garlic into the US. On the other side of the Pacific, Japan has ushered in the world’s first comprehensive economic security law which designates critical materials that Japan must de-risk. In this context, Japan has also leveraged industrial policy towards semiconductors, but also for airplane parts and fertilizers. With such a wide variety of products being securitized in this geopolitical environment we arrive at the research question: How are advanced democracies around the world dealing with the trade-offs between economic security and economic freedom?

To examine how the de-risking debate varies across democratic contexts, advanced democracies such as the United States and Japan will clarify what the future debates over economic security and economic freedom might look like. My co-authored work with Jack Zhang, published in Law & Geoeconomics, takes a close look at exactly this question by comparing how the United States and Japan have approached the task of “de-risking” their economies from China. De-risking proponents call for constructing small yards and high fences around key products and vulnerabilities. However, de-risking is inherently difficult: about 40% of all trade is globally concentrated, in which three or fewer economies provide at least 90% of global exports. A top-down national security argument is that some items, such as rare earths and other key inputs, might lead to dependencies that can be weaponized due to their overreliance on chokepoints. That said, the bottom-up politics of trade suggests that domestic special interests will be keen on influencing these debates to ensure that they emerge as winners of these economic security policies with redistributive outcomes. After all, in the United States and Japan domestic interests are key for understanding how Congress votes on free trade and how the Japanese Diet liberalizes its markets. Japan and the US have penned numerous bills that are aimed at revisiting their economic relations with China. The two countries have emerged as key barometers to examine what the future of de-risking might look like.

Japan Got Here First and Did It Differently

Japan’s economic security debate began well before similar discussions in Washington arose. In 2010, following a territorial dispute, China was accused of restricting rare earth exports to Japan -materials essential for electronics, electric motors, and defense technology. Japan’s dependence on China for roughly 90% of its rare earth supply quickly manifested into a strategic vulnerability. Japan’s response was measured, technocratic, and effective. Through targeted subsidies and active diversification, Japan worked to reduce its rare earth dependence on China from around 90% to roughly 58% by 2018.

This instinct for precision culminated in Japan’s Economic Security Promotion Act (ESPA), passed in 2022. The law is notable for what it includes and what it deliberately leaves out. It identifies eleven specific strategic materials such as semiconductors, fertilizers, antimicrobials, ship parts, and other various products. The law also implements a framework for adding in future products as was the case in the expansion of this list to include advanced electronics in 2024. In contrast to policy debates mentioning geopolitically distant countries such as China and Russia, the act never mentions China by name. The framing is forward-looking and systemic: Japan is securing what its people need whilst avoiding openly antagonizing their neighbor it still does billions of dollars of business with every year. That said, given that the previous rare earths de-risking program took 8 years to bear fruit it will take time before the effectiveness of this new policy can be evaluated.

The American Approach: Everything, Everywhere, All At Once

The United States joined the de-risking debate later and louder. The 2018 trade war and the COVID-19 supply chain catastrophe all combined to produce a bipartisan legislative wave of economic security policy proposals in Congress. Between 2018 and 2024 our paper identifies 166 bills in Congress that target traded goods with China. This number exploded tenfold between 2022 and 2023 as the number of such bills introduced in Congress went from 10 to 105 bills and resolutions. This number underscores legislative interest that followed landmark bills such as the CHIPS and Science Act, the Uyghur Forced Labor Prevention Act, and the Inflation Reduction Act.

With the World Trade Organisation in disarray, Congress has predictably argued for trade restrictions towards China on all sorts of rationale. The range of products caught up in this wave is wide-ranging: it includes everything from semiconductors and cloud computing infrastructure to consumer drones, mail, and even milk and garlic imported from China. The Uyghur Forced Labor Prevention Act, one of the most significant pieces of legislation in this space, restricts a large variety of imports from China’s Xinjiang region on human rights grounds. Though the legislation has framing not directly tied to national security, Beijing would interpret this act no differently than these other acts due to the economic externalities being all the same.

As evidenced by the various areas of commerce now subject to trade restrictions, the US approach is broader in almost every measurable sense when compared to Japan’s narrow definitions of economic security. The CHIPS and Science Act alone committed more than $52 billion to semiconductor reshoring, which is several times the entire initial budget Japan allocated across all eleven of its ESPA-designated products. The United States also deploys a far wider toolkit: tariffs, export controls, investment screening, entity lists, sanctions, visa cancellations. This wide variety of products whose trade is now restricted highlights that separating protectionism from national security in the US case is increasingly difficult in the bilateral context of US-China trade relations in which all aspects are becoming securitized.

US and Japanese Convergence

Although there are pointed differences in US and Japanese economic engagement with China, there is meaningful convergence along key products. Both countries have made semiconductors a top priority. Japan is now home to a TSMC fabrication plant in Kumamoto, as the US is building new Intel capacity in Ohio with various other projects popping up through both nations as a result of these industrial policies. Both have securitized the aviation industry, information technology infrastructure, and nuclear energy. Both are worried, in different ways, about the same fundamental problem: decades of economic integration with China have created chokepoints that China could, in a crisis, exploit.

This overlap is a key finding of our research. When two allied democracies with different political systems, different industrial structures, and different relationships with China independently arrive at the same list of concerns, that convergence carries real weight. It suggests that the “small yard” - the genuine security-relevant core of de-risking - is real. What remains to be determined is how many more small yards there will be and how high of fences that Japan and the US will be willing to build.

The Future of the De-Risking Movement

The debate isn’t just academic: for every product that becomes securitized, the economic price tag will land on the taxpayer. Consumers pay more either at the checkout or through higher taxes leveraged for industrial policies like the CHIPS and Science Act. Unilateral policies rarely only affect the targeted country: multinational corporations get caught in the crossfire as Japanese companies, like Uniqlo, face real disruption from US restrictions on Xinjiang cotton that had nothing to do with Japanese policy. Economic security policies and any move that restricts bilateral trade will have global ripple effects.

Japan, for its part, still largely believes in the rules-based trading system as it remains committed to multilateral frameworks. By contrast, between both presidential candidates walking away from the Trans Pacific Partnership in 2016, to President Biden’s continuation of the US-China trade war, Washington’s embrace of the international free trade regime has weakened. Despite these differences there will also be opportunities: as debates over global economic freedom reignite, will de-risking bring friendshoring and economic security cooperation? Perhaps if many small yards and high fences are constructed, small gates will be installed as well to ensure economic exchange with like-minded countries.

As more products are swept into the security tent and as the small yards grow more numerous and the fences taller, the question becomes unavoidable: if everything can be a national security issue, how can states demarcate where business can remain business and what products necessitate yards and high fences? While our article focused on the approaches taken by Washington and Tokyo, these dilemmas are not unique to them. Other major actors, such as the European Union, are grappling with these debates. Future research could build upon this analysis by examining how other actors approach these same debates. Finally, these debates are far more than academic. The economic costs of getting it wrong are not abstract: they show up in prices, in jobs, and in the durability of the alliances these policies are supposed to protect.

The intensifying U.S.-China Trade War has contributed to an immense loss of export markets for farmers. Meanwhile, the Iran War continues to heighten fuel and fertilizer costs. With farmers in jeopardy and midterms on the horizon, pundits and analysts alike are looking to assess how economic hardship may shape rural electoral engagement.

To cushion these mounting pressures, the Trump administration has relied on the 2025 Emergency Commodity Assistance Program (ECAP) to support the agricultural sector. ECAP provides large-scale direct payments to producers experiencing weak commodity prices and elevated input costs. Complementing this, the existing Agriculture Risk Coverage program (ARC) functions as a safety-net program that triggers payments when actual farm revenues fall below established benchmark guarantees. These programs matter not only as economic stabilizers, but also as political tools and in rural America. It is therefore important to understand whether this or future economic assistance can shore up farmer’s support for the Republican party.

This question sits at the center of Jake Jares and Neil Malhotra’s recent publication. Drawing on evidence from the first Trump Administration’s attempt to stem the cost of trade war, the Market Facilitation Program (MFP), the authors examine how exposure to trade shocks and subsequent government assistance influences farmers’ political participation and voting behavior. The authors leveraged variation in the MFP’s payment structure which, due to idiosyncrasies in program design, resulted in substantially different compensation levels across farmers based solely on their 2018 crop portfolios, with some producers undercompensated for tariff induced losses while others were significantly overcompensated. Using a sample of more than 165,000 affected voters, the authors link variation in net MFP benefits to two primary outcomes: turnout in the 2018 midterm elections and campaign contribution behavior in the months following the trade shock. This design allows for an assessment of how differential exposure to economic harm and subsequent federal relief translates into measurable changes in political participation and donor behavior.

Jares and Malhotra find that, contrary to expectations, variation in policy generosity had little to no meaningful effect on political participation. While improved compensation under the MFP, which provided direct payments to U.S. farmers to offset income losses caused by Chinese retaliatory tariffs, modestly increased farmers’ perceptions that the policy was helpful, it did not translate into statistically significant changes in turnout or campaign contributions. Among Republican farmers—the primary focus of the analysis—moving from the 25% to the 75% percentile of net benefits from the MFP resulted in only a 0.3 percentage point increase in turnout, a substantively negligible effect. Non-Republican farmers similarly showed no meaningful changes in political engagement if provided with more generous assistance, indicating that relief outcomes did not differentially mobilize or demobilize any partisan group.

Additionally, no evidence exemplifies that improved compensation influenced campaign contribution behavior in either direction, with effects on Republican and Democratic giving effectively indistinguishable from zero. Even when accounting for prior turnout history, the results remain stable, suggesting that ceiling effects are unlikely to explain the null findings.

The authors further examine how political engagement evolved over different phases of the trade war to better isolate the effects of exposure to both the trade war shock and ameliorative policies. First, comparing the voting patterns of farmers and demographically similar non-farmers, their results suggest that acute exposure to the trade war itself motivated farmers to vote in the 2018 midterm election. On average, Republican farmers’ turnout was 1.2 percentage points higher than comparable non-farmers who did not experience the trade war directly, while Democratic farmer’s turnout was 1.7 higher. Returning to campaign contributions, the authors find that in the early months of the trade war, before retaliatory tariffs were imposed on US agriculture, there were no statistically significant or substantively large differences in contribution behavior between farmers and comparable non-farmers. Following the June 15 tariff escalation and China’s retaliatory measures, crop futures prices fell sharply. However, this economic disruption did not immediately translate into changes in political contributions among either Republican or Democratic farmers. Similarly, the announcement of a $12 billion relief package on July 24 produced little observable response in donation behavior in the short run. More pronounced, though still modest, changes only emerge after MFP benefit rates are announced on August 27, and enrollment begins in early September. At that point, farmers with different political backgrounds show small but statistically significant increases in Republican-leaning contributions, while Democratic farmers show no meaningful shifts.

The largely null results are important because they suggest that even sizable variation in policy outcomes may have limited effects on political mobilization. Taken together, these findings advance two key strands of political science research: one on economic voting and responsiveness to government policy, and another on political mobilization through distributive benefits. The authors conclude that political engagement is shaped less by the magnitude of individual compensation and more by the broader visibility and salience of the policy environment, particularly the Trade War itself and the government’s response to it.

More broadly, the results challenge the idea that incumbent parties can reliably increase electoral participation among their base simply by delivering favorable economic policy outcomes by compensating economic losers. Instead, they suggest that the political effects of policy are more limited and contingent than often assumed.

Since the launch of Reform and Opening in the late 1970s, China has become deeply integrated into the international system and increasingly active within major international organizations (IOs). As China’s economic and political influence has expanded, scholars have debated whether Beijing seeks to revise the liberal international order or instead works pragmatically within existing institutions. One perspective argues that China aims to reshape or weaken liberal norms and institutions¹, while another contends that Chinese leaders view participation in international organizations as beneficial for advancing national interests2 without fundamentally overturning the existing order.

Despite extensive debate, there remains little consensus regarding how Chinese elites themselves view international organizations and China’s role within them. One reason is that most studies focus on China’s behavior in international institutions rather than how Chinese leaders publicly frame those institutions. Official media provides a useful window into these attitudes because it reflects the priorities and narratives promoted by the Chinese Communist Party (CCP).

This project builds on a dataset created by the Trade War Lab that tracks foreign coverage in People’s Daily articles3. Li et al (2025) finds that the newspaper functions as a source of information and as a mechanism for signaling leadership priorities and foreign policy narratives. As Chinese leaders consolidate power, foreign coverage becomes increasingly focused on articulating official policy positions rather than simply reporting events abroad. Figure 1 illustrates that mentions of major foreign powers, such as the United States, Japan, Russia, the United Kingdom, and France, remained relatively stable from the early 1990s through the mid-2010s. Beginning around 2016, however, coverage of all five countries declined sharply, with references to the United States falling particularly dramatically. This decline occurred despite growing geopolitical competition and China’s increasingly active role in international affairs, suggesting that changes in People’s Daily coverage may reflect shifts in propaganda priorities rather than the objective importance of foreign countries.

Building on these findings, this study examines how Chinese state media frames key international organizations, offering a window into elite understandings of global governance and China’s place within the international order. I conducted a preliminary textual analysis using Li et al.’s (2025) data to identify articles mentioning the United Nations (UN), World Trade Organization (WTO), International Monetary Fund (IMF), World Bank/ International Finance Corporation (IFC), and the World Health Organization and drew a small random sample of articles about each for qualitative content analysis. While limited in scope, this approach provides an initial assessment of how Chinese state media frames major international organizations.

Figure 2 places coverage of major international organizations (IOs) in comparative perspective. Unlike coverage of major foreign powers—which declined sharply after the mid-2010s—mentions of international organizations remained relatively stable. References to the United Nations consistently exceeded 1,200 annual mentions throughout the period, surpassing the coverage of every individual foreign country except the United States. Coverage of the IMF and WTO fluctuated substantially, peaking during the Asian Financial Crisis (1997) and China’s accession (2001) debates, but remained well above 1990s levels through much of the 2010s. This relative stability is notable because it contrasts sharply with the dramatic decline in People’s Daily coverage of major Western powers documented by Li et al. (2025). Coverage of major international organizations remained comparatively resilient and suggest that IOs continued to occupy an important place in official discourse during the Xi Jinping era.

A qualitative review of sampled articles helps explain this pattern. International organizations were generally framed positively and associated with themes of world peace, economic development, international cooperation, and multilateral governance. Discussions of reform focused on improving representation for developing countries, increasing institutional effectiveness, or strengthening global cooperation rather than questioning the legitimacy of the organizations themselves. When China’s interests were discussed, they were typically presented as compatible with broader international goals. Coverage of the World Bank and IFC, for example, frequently highlighted the role of development finance in promoting economic growth and shared prosperity.

Together, these findings provide preliminary evidence that Chinese state media does not portray the pillar IOs of the liberal international order as obstacles to China’s rise. Rather, they are generally depicted as useful platforms through which China can advance its interests in a multipolar world4. The findings also point to a broader narrative of growing Chinese confidence in its international role. Contrary to expectations that Beijing seeks to bypass or replace existing organizations through new institutions such as the Asian Infrastructure Investment Bank (AIIB), People’s Daily coverage suggests a strategy of engagement and influence within major IOs rather than seeking to dismantle them. At a time when the United States has become more skeptical of multilateralism, Chinese state media increasingly presents leadership in international organizations as both beneficial to China and essential for global governance.

While this exploratory analysis cannot resolve broader debates about China’s long-term intentions toward the liberal international order5, it is more consistent with interpretations that emphasize adaptation and engagement rather than outright rejection. More broadly, the findings illustrate the value of official media as a source of evidence about elite attitudes toward global governance.

In the fall of 2018, I and my co-authors were watching in fascination as President Donald Trump launched the most aggressive trade action against China that the U.S. had seen in decades. From our perspective as political economists, we wondered whether these new trade barriers would spur mobilization by businesses that saw increases in their supply costs. Given the enormous volume of trade with China, amounting to $505 billion of imports in 2017¹, we had ample reason to think that businesses would be upset. However, we did not know if the tariff costs would translate into real political action, especially for smaller companies that may not have the resources to stay up to date with rapidly changing tariff schedules but are nevertheless exposed to disruptions to overseas supplies chains.

To understand this dynamic, in 2019 we implemented an online experiment in which we provided business managers and employees with very specific information about tariffs that affected imports in their industries—such as increased aluminum costs and their effect on manufacturing inputs. Crucially, we provided this highly specific information only to a randomly selected treatment group, and to a control group we communicated only the very general impacts of the trade war. Following treatment, respondents were invited to consider taking political actions such as contacting Congressional representatives to either support or oppose the trade war.

To our surprise, we did not find much effect from providing this information on our respondent’s choices. Those who received this information and those who did not had roughly the same interest in political action. When we looked deeper, we found that the factor that best predicted their support for the trade war was not tariff input costs but rather their company’s political culture. Managers who worked at firms that had a largely conservative political culture tended to support the trade war and those who worked at left-leaning companies tended to oppose it. This finding helps bridge two previously disconnected literatures by showing that while partisan effects are well established in studies of individual trade attitudes, they are far more surprising when observed at the firm level, where international political economy models have long assumed that firms should care about the impacts to their business over anything else.

Since that time, tariff barriers have grown even higher2, and now cover imports from all around the world, not just China. Our analysis suggests part of the reason that companies have failed to mobilize against the trade war has to do with their political views, which apparently can prevent them from acting to advance the company’s best interest. Of course, our results also depend on the broader macroeconomic environment, and it could well be that a worsening U.S. economy leads to more widespread disapproval of tariffs among American firms and consumers3. In the end, partisan loyalty can be expensive for companies to maintain, and we do not know exactly when politics ends and corporate self-interest takes over.

The 2025 David P. Baron Award has been awarded to Lindsay R. Dolan, Robert M. Kubinec, Daniel L. Nielson and Jiakun Jack Zhang for their article "Tariffs and corporate political activity: a survey experiment on US businesses" (Volume 27, Issue 3)

Chinese designs on the Pacific are no secret. Ever since assuming power in 2012, Xi Jinping has directed the rapid militarization of various islands and shoals in the South China Sea. These developments are often paired with episodes of intrusion and harassment by Chinese vessels in the waters of its neighbors. Nations like the Philippines, Taiwan, and Japan have found their ships rammed, chased, or stalked by Chinese craft. China is unrelenting in mounting pressure for its claims in the Pacific, with no indication of subsiding.

China began asserting its claims to the South China Sea in the late 2000s and early 2010s. In response to exclusive economic zone (EEZ) filings by Malaysia and Vietnam in 2009, China issued notes verbales asserting jurisdiction over the relevant waters to these nations, while also publishing the “Nine-Dash Line.”¹ The EEZs of various nations and disputed landmasses lie within this Nine-Dash Line. Key focal points are the Paracel Islands, Spratly Islands, Scarborough Shoal, and Senkaku Islands.²³⁴⁵ China claims all of these areas, though maintains control in just the Paracel and Spratly Islands respectively.

Although sometimes violent, China’s attempts at asserting authority over these disputed territories has stopped short of invasion, instead involving what scholars call militarized interstate disputes (MIDs) and international crisis behavior (ICB). The former term comes from Douglas Gibler’s International Conflicts, 1816-2010: Militarized Interstate Dispute Narratives. In this work, an MID is defined as “a threat, display, or use of force by one state against another state.” For example, a Chinese naval vessel shadowing a Filipino craft within the EEZ of the Philippines would be an MID. An ICB, while similar, is a step above a simple threat or use of force. Rather, it is a specific incident that can be classified as an international crisis or diplomatic incident between two nations. While every Chinese incursion into Filipino waters is an MID, for example, only incursions that lead to some form of diplomatic incident or rupture between the two nations can be classified as an ICB. This term comes from Michael Brecher and Jonathan Wilkenfeld’s A Study of Crisis, which documents ICBs from 1918 to 2019.

Between 2018 to 2025, 7 ICBs have been documented between China and its neighbors. For context, A Study of Crisis documents 3 ICBs concerning China between 2010 to 2017. Of these seven, five consisted of Chinese incursions into the legal waters of its neighbors, often culminating in harassing or ramming foreign vessels. The remaining two consisted of the Chinese-Indian Skirmishes of 2020-2021, and the live-fire drill that the People’s Liberation Army-Navy (PLAN) conducted within the flight lanes of Australian commercial jets. These ICBs mark a clear increase in number compared to those recorded by A Study in Crisis prior to 2018. One possible explanation for this is the “Decision of the Standing Committee of the National People’s Congress on the Exercising of the Marine Right Safeguarding and Law Enforcement Functions and Powers by China Coast Guard.” Promulgated in 2018, this law vested the Chinese Coast Guard the authority to act as law enforcement within the Nine-Dash Line. However, this framework is often weaponized by Chinese authorities to justify their aggressive actions in the South China Sea, thus leading to an increase in incidents. One such example took place in 2020, where a Chinese naval craft rammed and sank a Vietnamese fishing vessel around the contested Paracel Islands. Chinese authorities justified the act by stating the Chinese Coast Guard were enforcing a fishing ban, a power that the aforementioned 2018 law had given them.

It is no surprise then that MIDs are also plentiful post-2018. In a project I undertook as a research assistant for the Trade War Lab, I recorded a comprehensive list of MIDs between 2018 and 2023. I documented over 200 specific cases of territorial incidents between China and another nation. Much like the ICBs, these incidents did not lead to any change in the status quo. Moreover, the vast majority of these MIDs concerned territorial issues in the South China Sea, often consisting of Chinese naval craft and or fishing vessels entering into and then harassing ships in foreign waters. Japan and the Philippines were the maritime neighbors of China with the most MIDs, at 47 and 33 respectively. Additionally, nations like Malaysia, Indonesia, and Vietnam were each involved in multiple incidents with China. Interestingly, many of these MIDs centered around oil survey ships passing through their EEZs, suggesting that China possesses economic interests in enforcing their Nine-Dash Line as much as they do territorial ones.

The dataset also records a number of US encounters with China. The reason for this is that US naval vessels often perform freedom of navigation operations (FONO) in international waters that China claims as part of the Nine-Dash Line. Germany, the UK, and Canada had their own run-ins with Chinese authorities for the same reason. These FONOs were typically protested in statements by China for violating their sovereignty. Lastly, it must be noted that this dataset did not record the often-daily airspace violations performed by the PLA against Taiwan. While these are certainly MIDs, these incidents were outside of the scope of a project that primarily focused on maritime MIDs (with the exception of China’s contested border with Bhutan and India) and frankly were too numerous to be recorded in detail.

Analyzing the MIDs and ICBs indicate two things. Firstly, it highlights the consistent pressure the PRC puts on its neighbors. Whether it be through oil surveys or harassing fishing vessels, there is a concentrated effort to bully and fatigue countries like Japan and the Philippines. Secondly, the increase of ICBs post-2018 indicates an escalation in these efforts. Based on the 2018 Chinese Coast Guard Law, China views the waterways and landmasses within the Nine Dash Line as integral to China, regardless of international conceptions of sovereignty. In a world where the stability of the United States and the post-WWII Global Order it supports are in doubt, it remains to be seen if these gray-zone pressures will increase as they had done after 2018.

Dear Reader:

Many of us at the Trade War Lab were skeptical when a group of ambitious new research assistants began talking about starting a Substack in April 2025. Partially responsible for the publication’s content as lab manager, I wondered what wisdom a group of twenty-somethings could add to the conversation about trade politics. At the same time, the lab had just lost federal funding. Launching a publication worth reading, among all the lab’s other projects, was going to be an uphill climb.

Looking back, launching the Substack is one of the achievements the lab is most proud of this year. Nearly every research assistant has contributed at least one article. In particular, Charlie Andrade’s role in pushing the lab to actually launch a Substack rather than just talk about it, and his excellent graphic design skills, were key to the publication’s success. Lance Lang, Maddie Doyle, and Stephen Zaken’s enthusiasm for taking assignments was also crucial. Editing the Substack and watching research assistants improve both their writing and their understanding of social science research has been the most rewarding part of my job.

Charlie, several RAs, and I are all moving on to new things with the end of the school year. The Substack will be left in good hands – more on that later – but first, I wanted to close out the year by pulling together the literature we’ve covered into a coherent (slightly editorialized) set of insights about firm politics and U.S.-China relations.

Background

After an amicable period during which many political elites believed open trade with China would liberalize their political system, two things became apparent. First, although it remains contested whether Beijing actively seeks to undermine the liberal international order, it has neither become a trusted democratic ally nor refrained from building its own capacity for economic coercion. Second, despite free trade’s national-level benefits, globalization produced isolated sets of “economic losers” in labor-intensive industries. For one reason or another (possibly some combination of voter backlash, elite security concerns, and political opportunism) these two outcomes preceded a sharp protectionist turn on both sides of the aisle.

The new politics of trade

Free trade is out, and something-short-of-autarky is in. America’s trade policy has been hawkish compared to other countries. For example, Japan’s approach to “de-risking” involves narrowly targeted legislation aiming to reduce dependence on China in industries key to national security, an initiative firms have responded to. In the U.S., policymakers’ approach to China has been broader, politicized, and, in the case of Trump’s most recent trade policy, dubiously legal.

Firm responses to the United States’ most high-profile strategy for disentangling Washington’s economy from Chinese supply chains – tariffs – vary significantly between companies. The first trade war did prompt a relatively small number of companies to exit China because of rising political risk, but corporations with large capital investments in China have largely stayed put. Some companies divert their supply chains in the face of economic barriers to trading with non-allies, but they only do so when there are safer third-country suppliers.

Even with some limited disinvestment from China, new supply chains are not necessarily more resilient to Chinese influence than previously. Countries that are highly interconnected with China have seen the fastest increase in trade with the United States since the first trade war. Although friend-shoring occurred, key determinants of which countries replaced Chinese suppliers were whether existing exports could function as substitutes and how quickly countries could ramp up production.

Where is the backlash?

Given that early evidence suggests American efforts to disentangle supply chains from Chinese influence were ineffective, why haven’t companies, faced with higher costs, protested? In our own survey of Kansas City–area firms the vast majority opposed tariffs. Indeed, trade restrictions were followed by a sharp increase in trade-related lobbying, but few companies have protested publicly. Conventional wisdom suggests that corporations should play a significant part in swinging political pressure back towards liberalization, especially considering American institutions are particularly amenable to special interests.

One answer might be that individual companies are avoiding public opposition to the trade war as a whole. Large companies appear to have successfully lobbied for tariff exclusions that benefit specific products they import, leaving smaller companies to fend for themselves if they do not use those products. Firms may also be lobbying as part of global supply chains, as opposed to collectively as industries, producing small carve-outs rather than more costly general opposition to tariffs. A political environment where companies may fear backlash if they publicly criticize tariffs and other trade barriers could also contribute to the use of quieter, narrower political influence tactics.

A second, possibly more concerning, reason could be political polarization. Corporations’ opinions on tariffs appear to be highly partisan. Even when firms are given information about the costs of tariffs, political culture outweighs knowledge of tariffs’ negative effects when determining which firms say they will reach out to representatives. This effect is not just talk: Farmers in more conservative areas were more likely to continue planting crops targeted by Chinese retaliatory tariffs in 2019, believing Trump’s assurances that these commodities’ plunging values would be temporary. If these studies are representative, the strength of business owners’ political loyalties could prevent them from organizing around what is best for their bottom lines.

Next steps for the Trade War Lab Substack

In sum, the politics of trade have changed rapidly in the past decade. Business interests have not mobilized to oppose these new trade restrictions to the extent scholars expected, despite the costs they impose. Further, broad tariffs seem unable to eliminate U.S.-Chinainterdependence.

These issues are the subject of a growing body of research in international political economy (IPE). With editing taken over by political science PhD student Callie Raacke, I am confident the Substack will identify and explain the best new research being produced. Under Callie’s guidance, the lab also plans to expand into covering classic works in IPE and showing how they can help us explain today’s trade politics. Finally, Masha Shirikov will be taking over our graphic design.

I am excited to see where the next group of editors and writers takes the Substack. There will be no shortage of important subjects to cover. If you are a University of Kansas undergraduate interested in contributing to IPE research and the Substack, look for the application for the fall internship in September. We’d love to have you!

The chaotic disruption of oil transportation through the Strait of Hormuz has strangled global energy markets. With Brent crude trading at $114 per barrel and U.S. gasoline prices averaging $4.45 per gallon, consumers, producers, and governments alike find themselves looking for pathways to minimize exposure.

This kind of disruption is severe, but not new, even in recent memory. The Russian invasion of Ukraine triggered a comparable disruption in global energy markets, driving oil prices from roughly $70 per barrel in early 2021 to $120 per barrel by mid-2022. Western economies were forced to draw on strategic reserves and accelerated efforts toward energy diversification.

The market volatility of the past few years, and, in particular, past few months, has reinvigorated political urgency globally surrounding the adoption of renewable energy. Green energy capacity and deployment have reached historically high levels,already accounting for 88% of new power generation in the United States and China both.1

As demand for alternatives to oil in the form of green energy accelerates, it feeds directly into the evolving economic competition between the United States and China. Control over green technology supply chains has become a central axis of the Trade War and presents an important long-term consideration: How do the United States and China currently compare in their green energy capabilities, and what does the balance imply for the next phase of their strategic and economic competition?

At the same time, both countries have deployed industrial policies to shape domestic green industries. Despite harsh cuts enacted by the Trump administration, the Inflation Reduction Act provides subsidies tied to domestic production and allied sourcing, aiming to build resilient supply chains.2 In addition, “friendshoring” strategies such as the 2023 U.S.–Japan critical minerals deal illustrates the intensifying effort to restructure green energy supply chains around trusted partners.3 China, by contrast, has pursued a long-term state-led strategy. By combining subsidies, low-cost financing, and industrial coordination, China now accounts for over 80% of global solar manufacturing capacity and roughly three-quarters of global battery production.4 More importantly, China’s dominance extends upstream. It refines approximately 60% of lithium, 70% of cobalt, and nearly 99% of battery-grade graphite, creating deep dependencies even for diversified supply chains.5 This upstream control ensures that relocation of final assembly does not eliminate reliance on Chinese inputs.

China’s pricing power further reinforces its position. Supported by economies of scale and state backing, Chinese solar and battery products are often 20–30% cheaper than competitors.6 This allows firms to capture global market share while pressuring Western producers. China accounts for more than half of global renewable energy capacity additions.7 Globally, China’s reach extends through exports and infrastructure development. As the largest exporter of solar panels and electric vehicles, it has established a strong presence across developing markets.8 Through the Belt and Road Initiative, China finances and builds energy infrastructure abroad, embedding its technology within long-term development pathways.9

Green energy has rapidly emerged as a core arena of U.S.–China competition, further extending the Trade War into advanced manufacturing and innovative technologies. The United States has increasingly relied on tariffs and trade restrictions to counter China’s position. In 2024, the U.S. imposed tariffs of up to 100% on Chinese electric vehicles, citing unfair subsidies and national security concerns.10 The tariffs escalated further following the Trump administration’s “Liberation Day” announcement, peaking at 135%.11 In tandem, the U.S. has maintained long-standing section 301 anti-dumping and countervailing duties on Chinese solar products through the U.S. Department of Commerce.12 More recently, this approach has broadened beyond finished goods to upstream inputs critical to the green transition, including expanded tariffs on lithium-ion batteries.13 These restrictions follow tightening restrictions on Chinese semiconductors and advanced technology exports used in electrical systems and computing.14

The two economic powerhouse’s positions on green energy expose a clear asymmetry: China dominates green energy manufacturing and upstream supply chains, while the United States is still working to buildout capacity and secure sourcing alternatives. Trump’s Iran policy, by contributing to oil market instability, is accelerating the global shift toward renewables—unintentionally strengthening demand in sectors where China has positioned itself as a leader. Ultimately, the political consequences of clean energy’s ascendance will depend on whether the United States can translate policy and alliances into scalable production before China’s advantage becomes too deeply entrenched.

Law & Geoeconomics (L&G) and the Trade War Lab are bringing together contributors to a forthcoming special issue on economic security agreements.

Thursday, May 14, 2026 @8:00-9:00am CDT (Zoom)

RSVP: https://forms.gle/2md4PFrGiHmdr6VN9

These arrangements have proliferated rapidly in recent years—spanning supply chains, critical technologies, export controls, and investment screening. Yet they resist easy categorization. They often resemble trade agreements in form but operate as security instruments in practice. Understanding them requires crossing disciplinary boundaries, which is exactly what this discussion aims to do.

This webinar brings together a set of perspectives from leading experts who will help map the emerging landscape of economic security cooperation and what this means for the future of global trade governance. Taken together, the discussion will highlight both the promise and the tension at the heart of economic security cooperation: the desire for deeper coordination in an era of geopolitical competition contributing to greater uncertainty about how far existing institutions can accommodate this shift.

The essays in this special issue also reflects the broader mission of Law & Geoeconomics: to serve as a platform for rigorous, double-blind peer-reviewed scholarship at the intersection of law and power politics in the global economy. We hope you’ll join us for what should be a wide-ranging and timely conversation.

Moderators:
Sarah Bauerle Danzman (Co-Editor-In-Chief Law & Geoeconomics and Associate Professor of International Studies, Indiana University, Bloomington)

Jack Zhang (Director of the Trade War Lab and Associate Professor of Political Science, University of Kansas)

Panelists:

Author: Daniel Drezner (Academic Dean and Distinguished Professor of International Politics at The Fletcher School at Tufts University)

Title: The Oxymoron of Economic Security Regimes

Abstract: As the open liberal economic order suffers from senescence, there has been a surge in economic security agreements—which now exceed 300 worldwide—as governments increasingly prioritize national security through policies like supply chain resilience, export controls, and critical mineral stockpiling. The paper considers the international relations theory underlying this shift – and the theoretical reasons for skepticism. While economic security is becoming a central organizing principle for international economic policy, its implementation faces significant obstacles. These include vague legal underpinnings, the risk of an economic security dilemma, and the lack of credible commitment from leading economies. Consequently, the long-term sustainability of economic security regimes remains highly uncertain.

Author(s): Mireya Solis (Philip Knight Chair in Japan Studies at the Brookings Institution) and Saori Katada (Louis G. Lancaster Chair of International Relations at the University of California, Santa Barbara)

Title: New Terms of U.S.-Japan Economic Security Cooperation: A Trump Reset?

Abstract: This commentary discusses how economic security has become a central issue-area in U.S.-Japan relations. The bilateral cooperation between these two large and technologically advanced economies constitutes a vital component of collective resilience. Facing the shifting geopolitical ground under the second Trump administration, Japan is actively retooling its economic security strategies, finding both areas to deepen its relationship with the United States and at the same time grappling with a less reliable partner. On the one hand, Japan’s build-up of strategic indispensability could help address U.S. needs and enhance Japan’s leverage. On the other hand, due to the Trump administration’s unilateral actions, the Japanese government faces greater challenges in building collective resilience amongst the “like- minded.” Japan has to aim for economic security in an ever more anarchic world, where the great powers are not willing to pitch in to provide (and abide by) a global economic order.

Author: Peter Harrell (Nonresident fellow at the Carnegie Endowment for International Peace American Statecraft Program)

Title: The Economic Security Elements Of America’s New Trade Deals: Economic Security With Hegemonic Characteristics

Abstract: In 2025, the United States began incorporating economic security provisions into the so-called trade agreements that President Trump signed with nearly 20 countries. These provisions cover both offensive tools, such as investments to boost U.S. and allied supply of critical materials, and defense provisions, such as export control cooperation and cooperation on tariffs. The deals are still in their early days and have yet to be implemented. This article provides an early assessment of the economic security provisions of the deals and makes policy recommendations as they move towards implementation.

Author: Maria Shagina (Diamond-Brown Senior Fellow for at the International Institute for Strategic Studies (IISS) Geoeconomics and Strategy Programme)

Title: Export Controls in US-led Trade Agreements

Abstract: Economic security trade agreements are emerging as the United States’ newest instrument for extending export-control enforcement beyond US borders. Rather than relying solely on domestic rules, extraterritorial licensing, and ex post interdiction, the second Trump administration is embedding anti-diversion and enforcement obligations directly into bilateral trade deals—explicitly linking tariff treatment and market access to partner action on export controls, customs enforcement, transaction screening, data sharing, end-use checks, and cooperation on investigations. In agreements, third countries are not merely encouraged to align; they are operationally folded into a US- anchored enforcement perimeter, turning trade partners into auxiliary nodes in the export-control ecosystem. That is what makes these agreements qualitatively distinctive: they are not traditional trade liberalisation instruments, nor are they standard export-control cooperation statements—they are trade contracts that condition preferential tariff treatment on measurable enforcement behaviour.

Author: Henry Gao (CIGI Senior Fellow and Law Professor at Singapore Management University)

Title: Decoding Trump’s Economic Security Agreements: It’s All About China

Abstract: This commentary examines the emergence of a new category of US trade agreements, beginning with the US–UK Economic Prosperity Deal and extending to recent arrangements with Southeast Asian and Latin American partners. Although these agreements fall short of traditional free trade agreements and are often dismissed as shallow because they do not liberalize substantially all trade, this paper argues that such assessments miss their strategic significance. Precisely because they depart from the FTA model, these agreements illuminate the evolving priorities of US trade policy: the elevation of economic security over liberalization, alignment over reciprocity, and control over efficiency. The commentary analyzes the structure and function of these arrangements, showing how they are designed to address the “China shock” indirectly through third countries, and assesses their implications for China, US partners, and the future trajectory of the global trading system.

Law & Geoeconomics (L&G) is a new double-blind peer-reviewed journal that aims to be at the forefront of the emerging interdisciplinary field of geoeconomics. The journal provides a platform for scholars to rigorously analyze:

1) The role of economic power politics in shaping the laws and norms that govern the global economy

2) The role of law in conditioning power politics by economic means

This is an excellent outlet for scholars working on topics such as economic statecraft, weaponized interdependence, economic diplomacy, economic security, economic warfare, or geoeconomics broadly, and we warmly invite you to join us for this event!

America’s current political upheaval surrounding free trade has brought trade policy preferences to the fore. While public discourse often focuses on the divide between labor and the C-suite, this debate misses another critical but overlooked cleavage: firms within the same industry are often divided over trade policy

This divide is rooted in firm-level differences. Large firms with greater capital resources and more competitive business models can pay the high fixed costs that offer them access to export markets and the ability to offshore production. Smaller firms, by contrast, tend to face intensified competition from imports without comparable market access.1 Not all industries rely on global trade: in these sectors, large firms do not benefit from lower trade barriers, producing unified preferences for protectionism among all firms within these sectors. However, in industries characterized by intra-industry trade (IIT) or global value chain (GVC) participation, whether firms are large enough to benefit from global integration divides companies, with large firms favoring liberalization and small firms preferring protectionism. As a result, globally integrated industries can be internally fragmented along pro-trade and anti-trade lines.

Existing scholarship has largely explained the policy consequences of these divisions through a collective action framework. Large firms, with greater resources and organization, are better positioned to influence policy. Smaller firms struggle to rally resources and coordinate. As a result, the preferences of large firms are expected to determine policy.

Sujin Cha’s and Ian Osgoods’ 2025 article centers on how special interest institutions (SIIs) — domestic political rules that increase the access or influence of interest groups over policy makers — mediate the relationship between corporate trade policy preferences and policy outcomes. These include campaign finance laws that allow corporate contributions, lobbying regulations, and formal mechanisms for policy feedback. Cha and Osgood hypothesize that the effect of special interest institutions on trade policy depends on the structure of the industry. In industries without intra-industry trade or GVC integration, stronger special interest institutions lead to higher trade barriers. Conversely, in industries with IIT or offshoring, they produce lower barriers. They further expect that the trade-liberalizing effects of IIT and GVCs will be strongest where special interest institutions are most developed.

To test their theory, Cha and Osgood combine extensive data on tariffs and trade flows across millions of product-country-year observations. They draw on the World Integrated Trade Solution and BACI datasets, documenting intra-industry trade and GVC participation as a measure of industry preferences. To capture global value chain participation, they incorporate data from the OECD. Their primary measure of SSIs is based on corporate political contribution rules compiled by the International Institute for Democracy and Electoral Assistance.

The paper’s findings show that the effect of special interest institutions on trade policy are highly contingent on the level of intra-industry trade. In industries with low IIT, where firms are more uniformly threatened by imports, increasing the influence of special interest institutions leads to higher tariffs. In these contexts, organized interests are aligned in favor of protectionism, and institutional access reinforces this outcome.

The impact of high IIT on tariffs is strongest in environments with robust special interest institutions. Where firms have greater political access, increases in IIT are associated with significantly lower trade barriers, reflecting the influence of globally integrated firms. Where such institutions are weak, the liberalizing effect of IIT is more limited.

The analysis of GVC integration yields parallel results. In industries with low GVC participation, increasing the influence of special interest institutions leads to higher tariffs, as firms are more uniformly protectionist. But as GVC integration increases, this effect diminishes and can reverse, with institutions instead facilitating lower trade barriers. At the same time, the trade-liberalizing impact of GVC integration is strongest in contexts where SSIs are well developed. When firms have greater access to policymakers, globally integrated firms are better able to translate their preferences into policy outcomes. Overall, the findings demonstrate that SSI’s play a moderating role: they amplify the preferences of the most powerful firms within an industry.

Cha and Osgood show that special interest institutions allow the most organized and well-resourced actors to exert outsized influence over trade policy. However, this influence does not produce uniform outcomes. Instead, its effects depend on the structure of the industry and the relationship to foreign competition of the industry.

As trade policy continues to shift in response to evolving global supply chains and economic tensions, this framework helps explain why countries and particular industries adopt different levels of protectionism or liberalization. By accounting for variation in both political institutions and industry structure, it shows how similar pressures can produce divergent trade outcomes across countries and sectors.