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The art of the trade war: new CAGE short

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The art of the trade war: new CAGE short

Watch the first in our new series of CAGE shorts: short films under 3 minutes describing our research.

Are trade wars 'good and easy to win' as President Trump has claimed? Thiemo Fetzer and Carlo Schwarz investigated Trump's trade wars and found that retaliation against his tariffs were highly politically motivated. Both the EU and China responded with tariffs that systematically targeted the Republican voter base in the US, good such as bourbon and cranberries. This new CAGE short video explains it all.

While the EU navigated a trade-off that targeted Trump voters without causing significant harm to their own consumers, China achieved a high degree of political targeting at the expense of its own economy: targeting agricultural goods for which the US is a major supplier, like soya beans. One interpretation is that China was not as adept at setting their tariffs as the EU. Another is that, as an autocracy, China didn't feel the same need to protect its own consumers. As such, China is free to put in place any tariffs it thinks necessary to stop the escalation of the trade war. Has it worked? Only time will tell.

Find out more about the research

Thiemo Fetzer and Carlo Schwarz, Tariffs and Politics: Evidence from Trump's Trade Wars, CAGE Background Briefing series, 97, April 2019

Thiemo Fetzer and Carlo Schwarz, Tariffs and Politics: Evidence from Trump's Trade Wars, CAGE working papers no. 407

Why you should never start a trade war with an autocracy, The Economist, April 2019