Three years after President Donald Trump launched his signature trade war against China, U.S. tariffs on a wide range of Chinese goods remain in place. China’s purchases of U.S. exports, part of Beijing’s January 2020 deal with the Trump administration, fell far short of promises. In fact, the U.S. logged a $355.3 billion trade deficit with China in 2021 — and China purchased more U.S. goods in 2017, the year before the trade war began, than it did last year.
The trade war has negative impacts on U.S. businesses and contributed to the supply chain woes that have affected nearly all aspects of the U.S. economy. Despite rising concerns that tariffs are contributing to surging inflation, the Biden administration has yet to back down from Trump’s stance on trade. So why has the trade war endured?
We ran a real-world trade data experiment
In an online survey experiment with U.S. managers over the past two years, we learned why businesses haven’t unified to push against the trade war. Our findings suggest that U.S. companies disagree strongly on whether the trade war hurt or helped their businesses, and that managers interpret information they receive about the trade war’s costs in that light.
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Some large, influential companies protested the trade war both publicly and privately — but why wasn’t there a broader push to stop it? To find out, we built a massive data set specifying how thousands of products used by hundreds of industries were probably affected by tariffs.
We then implemented an online experiment involving more than 900 managers of mostly small and medium-size enterprises. We randomly gave some managers detailed information about all the products their company might have purchased in the past year — naming products we know were affected by U.S. tariffs on products from China.
Next, we tracked companies’ interest in political actions to support or oppose the trade war through signing petitions, contacting members of Congress or donating to advocacy campaigns. But, to our surprise, we found that providing the detailed information to managers tended to reduce their interest in opposing the trade war — although the story only starts there.
Businesses tend to have partisan cultures
What explains this counterintuitive pattern? It’s important to understand the polarized environment in which companies are making decisions. Even for business managers, support for the trade war is partisan. According to a recent Chicago Council poll, 83 percent of Republicans favor increasing tariffs on Chinese imports. Only 45 percent of Democrats do, while 50 percent oppose these tariffs.
Our survey provided more evidence of this trend. We asked all of our participants to identify the political culture of their company using a liberal-to-conservative scale. We found these labels tracked with the company’s actions for or against the trade war: As few as 10 percent of respondents at conservative companies showed interest in opposing the trade war, while as many as 50 percent of participants at liberal companies did.
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It may be that companies take political positions that appeal to their local customer bases. But we think it’s more likely that managers behave like humans with opinions and limited information. We often assume businesses act in their best corporate interests, but on polarized issues like a trade war, that may not always be the case.
Who knows what about the trade war?
The figure below from our survey data reveals disagreement among U.S. companies about the trade war’s benefits and costs. When we examined data, we learned that companies in the hardest-hit industries also had the most accurate beliefs — reporting they were harmed by tariffs. For other companies, the lower number of tariffs in their industry meant they never needed to learn the detailed impacts of the trade war, leaving them to form rather inaccurate — and possibly partisan — guesses about the full impact.
Beliefs and partisanship shape political action
Putting these two clues together — partisanship in companies and diverse beliefs about the trade war — explains what’s probably going on in U.S. companies. Before our experiment, we thought that if companies knew concrete details of the trade war’s impact, those with higher costs might choose to advocate against tariffs. However, we also had a hunch as to why this also might not happen: People might interpret the data to fit their preexisting beliefs and political identities.
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When we took a closer look, we found that providing information about the trade war did increase the willingness of U.S. managers to consider political action — if they had both a lot of knowledge about the trade war and believed it was harmful. We found that the opposite reaction occurred among managers who didn’t know much about tariffs but believed the trade war helped their firms. For these managers, providing this information made them less likely to oppose the trade war despite learning about the real costs to their companies.
In other words, managers were more willing to take action if the information we gave them matched the beliefs they already had about the trade war’s impact on their companies. Managers were willing to consider new information about the trade war’s effect on their companies only if they already had a reasonably good idea about the role the trade war played in the economy.
Are businesses immune to partisanship?
For companies that believed the trade war helped their business — regardless of whether this was actually true — managers interpreted additional information in that light. Furthermore, managers’ beliefs are probably influenced by partisanship, which seems to affect how businesses view the trade war. In this information-scarce and highly polarized environment, businesses’ unwillingness to challenge the trade war does not seem so strange.
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Lindsay Dolan (@lindsayrdolan) is an assistant professor of government at Wesleyan University.
Robert Kubinec (@rmkubinec) is an assistant professor of political science at New York University Abu Dhabi and the author of the forthcoming book “Making Democracy Safe for Business: Corporate Politics During the Arab Uprisings.”
Daniel Nielson is a professor of government at the University of Texas at Austin and the co-author of “Global Shell Games: Experiments in Transnational Relations, Crime and Terrorism” (Cambridge University Press, 2014).
Jiakun Jack Zhang (@HanFeiTzu) is an assistant professor of political science at the University of Kansas.