Trade Rage: Audience Costs and International Trade

• Date: 01 July 2021
• DOI: 10.1177/0022002721994085
• Author: Richard Clark,Don Casler
• Published date: 01 July 2021
• Subject Matter: Articles

Article

Trade Rage:

Audience Costs

and International Trade

Don Casler

1

and Richard Clark

1

Abstract

Politicians frequently issue public threats to manipulate tariffs but only sometimes

follow through. This behavior theoretically ought to generate audience costs. We

therefore test the validity of audience costs in trade war settings through a

vignette-based survey experiment. The vignettes describe a hypothetical situation

involving the U.S. and a second country (China, Canada, or unspecified) with whom

the U.S. has a trade deficit. The president (Democrat, Republican, or unspecified)

either maintains the status quo, threatens to impose tariffs and backs down, or

threatens to impose tariffs and follows through. Our findings highlight differences

between security and trade conflict when it comes to audience costs and presi-

dential approval. While Americans sanction the president for issuing a threat to raise

tariffs, they generally support backing down. Regression modeling and text analysis

of a free response question from our surveys suggest this is because consumers are

wary of paying the costs of tariffs.

Keywords

audience costs, trade, tariffs, public opinion

On January 17, 2018, President Trump issued his first threat to sanction China over

the alleged theft of intellectual property. Trump also lamented the U.S.-China trade

deficit and expressed a desire to insulate American workers from Chinese imports.

1

Columbia University, New York, NY, USA

Corresponding Author:

Richard Clark, Columbia University, 420 W 118th Street, 7th floor, New York, NY, USA.

Email: rtc2124@columbia.edu

Journal of Conflict Resolution

2021, Vol. 65(6) 1098-1130

ªThe Author(s) 2021

Article reuse guidelines:

sagepub.com/journals-permissions

DOI: 10.1177/0022002721994085

journals.sagepub.com/home/jcr

Five days later, the President followed through on his threat, imposing tariffs on all

imported washing machines and solar panels, both of which the United States buys

in large volumes from China. On September 7, 2018, the President threatened further

tariffs on $267 billion of Chinese imports. Two weeks afterward, a 10 percent tariff

on $200 billion worth of Chinese imports went into effect. The Trump administra-

tion concomitantly threatened to increase that tariff rate to 25 percent by January 1,

2019. But on December 1, the President announced a delay in the pending tariff

increase until at least early March. By February 25th, he had extended the March

deadline on an open-ended basis.

The president’s persistent use of public economic threats, and the apparent var-

iation in the extent to which he has followed through or backed down on these

threats, pose an important puzzle for international relations scholars broadly and

the conventional theory of audience costs more specifically. On the one hand, a raft

of theoretical and empirical evidence suggests that leaders pay approval costs for

issuing public threats and subsequently backing down.

1

Scholars explain this effect

as one comprising public intolerance of both belligerence and inconsistency, as

different segments of the population disappr ove of threats in general versus the

perceived weakness that comes with backing away.

2

On the other hand, it is unclear

whether audience costs ought to manifest outside of the security-focused cases on

which the theory has mostly been tested or in instances where reputational consid-

erations may be less salient to the public than policy outcomes.

3

Perhaps the per-

ceived stakes are higher in military conflict and crises than in economic affairs, for

instance, driving greater concern about threatening military action or maintaining

consistency between words and deeds.

4

But this literature has yet to assess whether

leaders should face similar approval costs to those found in military conflict when

their threats and subsequent actions are confined to tariff policy.

5

We therefore address the following question: Does the logic of audience costs

extend to tariff policy? There are at least two compelling reasons why this might be

the case. First, and as suggested above, leaders commonly issue public threats on

economic matters, and especially trade.

6

Second, these public threats engage

concerns about the leader’s reputation both internationally and domestically. The

conventional mechanism behind audience costs is that citizens want their leader to

be perceived as tough and willing to follow through on their statements—hence the

stress on consistency between word and deed. Consistency in turn conveys the

credibility of the leader’s signal to international audiences. If economic affairs more

broadly and tariff policy specifically are no different than traditional audience costs

settings, the general parameters of the theory ought to apply. In fact, scholars have

shown that threats to impose mor e generic economic sanction s do generate the

predicted audience costs effects.

7

However, if there is something distinct about tariff policy in particular, then

audience costs may be a poor fit for explaining public attitudes towards leaders who

threaten and/or impose tariffs. We argue that audience costs are unlikely to manifest

in the context of presidential threats and actions on tariff policy. This is because

Casler and Clark 1099

tariff policy, unlike military intervention or more generic economic sanctions,

carries well-defined economic cons equences for domestic publics in the issu ing

country, and citizens on average tend to lose from higher tariffs. Under these con-

ditions, we believe that citizens prioritize economic self-interest considerations over

reputational concerns. Moreover, we argue that this is true regardless of which

theoretical framework for economic self-interest is applied. Indeed, irrespective of

whether skill-based accounts like Heckscher-Ohlin (H-O),

8

industry-based theories

like Ricardo-Viner (R-V),

9

or consumer cost theories

10

are applied, the theoretical

prediction is identical: Americans should on average show an aversion to both

threats to impose tariffs and subsequent tariff hikes. In other words, citizens should

oppose presidential tariff threats, but support the president backing down from these

threats.

One crucial caveat here is that citizens must be able to connect shifts in tariff

policy to their economic wellb eing. Extant research shows th is is often not the

case.

11

However, because of the context in which we field our original survey

experiments (namely the United States in January and April 2019), we anticipate

that respondents should have been able to lin k tariffs with welfare. During this

period, tariff policy was particularly salient, as the U.S. and China had been engaged

in a costly trade war for just over one year, generating substantial public debate and

economic reverberations. Indeed, Figure 1 shows that our experiments were

deployed at moments of particular salience for trade-related issues. As a result of

the high-information environment in which we conduct our research, we conclude

that respondents can likely connect changes in tariff policy to their economic well-

being. We therefore apply the well-established audience costs logic to the context of

an international trade dispute. However, we hypoth esize that citizens should on

average be unsupportive of both tariff threats and subsequent actions to increase

tariffs, as they bear in mind the economic costs of such policies.

In our experiments, we vary whether or not a hypothetical president threatens to

impose tariffs and subsequently fol lows through. We also vary the party of the

president (Democrat or Republican) and the target country (Canada or China). We

find strong evidence to support our argument—Americans revise their opinions of

the president downward when he issues threats to impose tariffs and when he follows

through on said threats. In other words, Americans broadly disapprove of the

president issuing trade threats in the first place, yet they are not likely to sanction

him if he fails to implement the threatened tariffs. On the contrary, there may be

aconsistency cost to the president for going ahead with the tariffs. This suggests

that a basic level of tariff-driven economic self-interest transcends the logic of

audience costs.

To probe the drivers of this result, we examine several explanations derived from

existing literature on public opinion towards trade. These include general costs to

consumers and individual-specific levels of skill and industry of employment. We do

not find evidencethat low-skill workersor those employed in import-competingindus-

tries approvemore strongly of tariff aggressionthan others. Therefore,we suggest that

1100 Journal of Conflict Resolution 65(6)