Preferences, Domestic Institutions, and Trade Wars

We review the domestic politics of trade wars with a focus on preferences and institutions. Our review highlights the centrality of domestic distributive conflicts in understanding trade wars. We start by analyzing trade wars from the perspective of voters as consumers. We then turn to firms and employees, emphasizing patterns of fragmentation and cohesion created by modern production technologies: while the immediate effects of product-specific tariffs are limited to relatively few firms and their employees, these effects migrate along domestic supply chains. Using the example of the U.S.-China trade war, we document the geography of the direct and indirect exposure to the trade war across U.S. counties. We also outline implications of our preference map for several categories of institutional theories. Finally, we identify a different question: given the considerable economic costs of trade wars, why do governments fail to reach a settlement before escalating?