‘Trade wars are good, and easy to win,’ tweeted Donald Trump in 2018. The US–China trade war that followed proved otherwise – especially when confronting a major economic power. Yet, can trade wars ever be good? While the academic consensus holds they harm all participants, we argue that under certain circumstances they can produce positive outcomes. Set against the backdrop of the Liberation Day tariffs announced on April 2, 2025, this paper examines the limits of the Ricardian free trade model underpinning the current multilateral trading system, identifies when trade wars may serve strategic goals, and explores alternative rules to address state-capitalist distortions without costly, prolonged conflict.

China's consistent message to the U.S. since Donald Trump 's election is the need for deeper cooperation. But Trump and his hawkish advisers and Congressmembers seem bent on a trade war and closer ties to Taiwan. His strategy is that once the Middle East and Ukraine are “solved,” he will be positioned to force Xi Jinping's hand. But the Chinese have options for dealing with U.S. economic pressure. Still, Trump might bargain on U.S. security ties if he can get a deal on trade. The most likely outcome is more tension in U.S.-China relations and a further drift toward Cold War-era competition.

The trade war with China has cost US producers and consumers hundreds of billions of dollars since 2018. Yet relatively few US businesses took action to oppose it. This study reports the results of an elite survey experiment on business political activity toward trade policy. Researchers presented business managers with information about the input costs of the new tariffs to their bottom line—information that most subjects acknowledged that they lacked—and invited them to take political action to express support or opposition to these tariffs. The results suggest that the novel information on economic costs did not significantly increase managers’ propensity to contact members of Congress, donate to political campaigns, sign petitions, or join social media groups. We also found that the firm’s political culture (liberal or conservative) did not significantly influence the effectiveness of the treatment. However, descriptive analysis showed that firm political culture was strongly related to the company’s support for the trade war, suggesting that these preexisting political beliefs were resistant to new information provided in our experiment even if that information could affect the company’s bottom line.

This paper examines the attitudes of multinational corporations (MNCs) toward the U.S.-China trade war through an original survey of China-based MNC subsidiaries in the manufacturing industry. Our argument is in two parts. First, firms that have relocated production outside of China or are considering such moves should be less likely to oppose the trade war as they possess outside options that reduce their vulnerability to trade restrictions. Second, firms’ tendency toward production relocation can in turn be explained by their local sourcing dependence, as measured by the level of such dependence and the degree to which their operations require supplier certification. This is because firms more heavily embedded in local supplier networks face stronger resource dependence that increases organizational inertia, reducing their ability to switch to alternative suppliers and therefore relocating production to other destinations. Our findings corroborate our hypotheses, highlighting how the heterogeneity in MNCs’ supply chain relationships may influence both their manufacturing relocation decisions and trade policy preferences.

This paper examines the economic implications of the tariff increases by the United States and by China during the Trump era trade dispute and the gains from their potential removal. The increases were dramatic, with the US raising tariffs on industrial products by a factor of six – with particularly large tariff increases on intermediate and capital goods – and China increasing its tariffs on US agricultural products more than five-fold. These changes distort trade and production decisions in both countries and undercut the global trading system. They resulted in substantial economic losses to each country, with import volumes reduced by 4.9% in China and 4.5% in the USA, and bilateral trade patterns were massively distorted. Their cost to the United States rose at the end of 2021, when the import expansion provisions of the Trump era Phase One Agreement expired. Negotiating the abolition of these costly and disruptive tariffs would generate substantial real income gains for both countries and help lower US consumer prices.

Which factors make some American multinational corporations (MNCs) take political action in response to the US–China Trade War and cause others to stay on the sidelines? We identify China-based subsidiaries of US firms to identify firms’ political actions in response to the trade war. We combine data on firms’ tariff exposure, economic actions in China, and political actions in the United States during the trade war. Together these data highlight the divergent strategies with which firms engage. Even though more than 63 percent of MNCs in our sample were adversely impacted by tariffs, only 22 percent voice opposition and 7 percent exit in response to the trade war. Our analysis reveals that US MNCs in China differ in their business models, ownership structure, experience in China, and size of capital investments. These firm-level factors determine the degree to which US MNCs are embedded in China. This in turn shapes how firms perceive political risk and choose from the menu of options to deal with the trade war. Size and age increase voice while joint-venture status decreases it.

This paper provides a systemic study of China's policy and legal responses to security-related actions and disputes in the international trade regime. It starts with a brief review of the law and practices relating to the security exceptions under the World Trade Organization to provide an important context for understanding the recent developments of China's approaches to national security. Based on a detailed discussion of China's approaches at international and domestic levels, we argue that China's security strategy has been shifting from being defensive to proactive: internationally by seeking to influence the development of trade rules and practices, and domestically by expanding national security to cover a wide spectrum of economic security interests and developing a comprehensive regulatory framework to protect such interests. The way in which major trading nations are taking the law into their own hands, based on ever-expanding security interests, does not bode well for the future of the multilateral trading system. There is a pressing need for collective action by all governments involved to re-design security-related rules and exceptions to confine the use of security measures to agreed parameters.

This article constructs a measure of geopolitical and economic tensions in US–China relations based on the sentiment expressed in major US news media and utilizes it to analyze the impact of bilateral tensions on US imports from China between 2002 and 2019. Our results suggest that bilateral tensions have had a negative effect on US imports. Additional analyses of the impact of bilateral tensions for industries with varying levels of supply chain linkages to China suggest that, contrary to expectations, they have more disproportionately affected industries highly integrated with the Chinese market. This pattern continues to hold during the trade war period. Not only were bilateral tensions associated with higher tariffs for industries with high levels of global value chain linkages to China, but the tariff hikes have also had a more sustained impact on such industries. Overall, our findings indicate that potential “sunk costs” considerations may not have been strong enough to forestall the downward trend in bilateral trade relations under both routine diplomacy and trade war conditions.

This paper estimates changes in demand for imported wines by source country and resulting welfare effects due to Section 301 tariffs imposed on certain European wines in October 2019. A two-stage expenditure allocation scheme is used to estimate the import demand for red, white, and other wines in the first stage, and source-differentiated red wine and white wine demand in the second stage. From derived price elasticities measuring first and second stage interactions, welfare measures are simulated capturing effects of the new tariffs on both taxed and non-taxed exporters as well as the US importers of red and white wine.

In response to President Trump instigating conflict over trade with China, the Chinese government countered by issuing tariffs on thousands of products worth over USD 110 billion in US exports. We explore whether China's tariffs reflected a strategy to apply counterpressure by hurting political support for the president's party. We also assess the strategy's impact on the 2018 midterm elections and examine the mechanism underlying the resulting electoral shift. We find strong evidence that Chinese tariffs systematically targeted US goods that had production concentrated in Republican-supporting counties, particularly when located in closely contested Congressional districts. This apparent strategy was successful: targeted areas were more likely to turn against Republican candidates. Using data on campaign communications, local search patterns online, and an original national survey, we find evidence that voters residing in areas affected by the tariffs were more likely to learn about the trade war, recognize its adverse impact, and assign the Republicans responsibility for the escalating dispute. These findings demonstrate how domestic political institutions can be a source of vulnerability in interstate disputes.

Under the Trump administration, a transatlantic trade conflict has been escalating step by step. First, it was about tariffs on steel and aluminium, then about retaliation for the French digital tax, which is suspended until the end of the year. Most recently, the US administration threatened the European Union with tariffs on cars and car parts because of Canadian seafood being subject to lower import duties. As simulations with NiGEM show, a further escalation of the transatlantic trade conflict has the potential to slow down economic growth significantly in the countries involved. This is a considerable risk given the fact that the countries have to cope with the enormous negative effects of the pandemic shock. Furthermore, the damage caused by the trade conflict depends on the extent to which the affected countries use fiscal policy to stabilise their economies.