Politics of the U.S.-China Trade War

Session Submission Type: Virtual Created Panel

Session Description

The U.S.-China Trade War represents the most serious disruption to global supply chains since their emergence. Average U.S. tariff levels on Chinese goods have increased over six-fold since 2018 and cover two thirds of imports and most of these new tariffs remain in place even after the signing of Phase One deal. This panel explores the impact of escalating tariffs on supply chains and on the political behavior of U.S. firms. The papers reveal the heterogeneity of U.S. firms in terms of their preferences and behavior according to their economic exposure to tariffs, their political resources, and the resilience of their supply chains.

Zeng et al examine the impact of political and economic tensions on trade flows, helping put the U.S.-China Trade War in a historical context. They find that the effect of geopolitical tensions on trade is mediated by the nature of supply chain linkages in a particular sector. The trade war pronounced effects on U.S. imports for industries with medium backward or forward global value chain linkages to China as well as for those with low related-party trade with China but much more limited impact on industries with extensive supply chain linkages to the China. Dolan et al conduct the first large scale survey of U.S. firm-level responses to the trade war and use an embedded survey experiment to explore whether the willingness to undertake collective action is influenced by the availability of information.

Zhang et al link China-based subsidiaries to political behavior of parent companies in the U.S. in order to examine the effects of firm-heterogeneity on how firms respond to tariffs. They find that collective action in the face of rising tariffs was hindered by the fact that smaller firms lacked political resources to voice while many larger firms lacked incentives to do so. Waddick et al argue that decisions to grant tariff exemptions are likely driven by two factors: (1) firms’ political influence and their strategies, and (2) politicians’ considerations to minimize consequent electoral impact in their constituencies. They find that firms that have stronger connections with congressional representatives and those that are located in Republican districts are more likely to be granted tariff exemptions.

Sub Unit

• Division 16: International Political Economy

Individual Presentations

• Bilateral Tensions, Global Supply Chains, and U.S.-China Trade Relations - Ka Zeng, University of Arkansas, Fayetteville; Rob Wells, University of Arkansas; Austin Wilkins, University of Arkansas

• Domestic Politics of Trade Wars: Evidence from a Field Experiment on U.S. Firms - Lindsay R. Dolan, Wesleyan University; Robert Kubinec, Princeton University; Daniel L. Nielson, University of Texas at Austin; Jiakun Zhang, University of Kansas

• The Politics of Tariff Exclusion - Aubrey Waddick, Pennsylvania State University; Boliang Zhu, Pennsylvania State University; Angel Manuel Villegas Cruz, Pennsylvania State University

• In the Middle: American Multinationals in China and Trade War Politics - Jiakun Zhang, University of Kansas; Samantha Vortherms, University of California, Irvine; Rigao Liu, University of Kansas

Chair

• Shiping Hua University of Louisville

Discussants

• Yeling Tan University of Oregon

• Jieun Lee University at Buffalo, SUNY