Trade Wars Aren’t Just About Economic Costs. They’re About Politics.
This post was originally published on Cambridge Core blog and is reposted here with permission.
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)
See https://www.census.gov/foreign-trade/balance/c5700.html for more information.
See https://www.atlanticcouncil.org/programs/geoeconomics-center/trump-tariff-tracker/ for more information.
See https://www.pewresearch.org/politics/2026/02/04/americans-largely-disapprove-of-trumps-tariff-increases/ for more information.
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