Lawrence – In his latest inaugural speech, President Trump referred to William McKinley as an excellent president who “made our country rich in tariffs”.
“In the late 1800s, before we could coordinate production in a whole group of countries, tariffs served the target effect,” said Jack Zhang, a professor of political science at the University of Kansas. “No complex product is done anymore that way.”
A fee is simply a tax on imported goods. But for something so straightforward, many wrong concepts are numerous, such as who pays for them.
“President Trump claims that foreign countries are paying for fees. This is actually inaccurate, ”Zhang said.
“Tariffs are placed in US entry ports and collected from customs and protection of the American border from business that is importing goods. And ingredients made abroad, you pay a fee.
Global production makes it complicated for US companies to determine how much tariffs cost them because they may not directly import goods, but are indirectly exposed to tariffs if their suppliers make. Zhang and his co -authors created an experiment to see if the provision of information about tariff costs for companies can affect political support or tariffs, and the results appear in a new work entitled “Fees and Political Activity E Corporations: A survey experiment on us businesses. “
He introduced business managers with information adapted regarding the costs given new tariffs at their end and invited them to take political actions to express support or opposition to these tariffs. The findings suggest that this information does not significantly increase the tendency of managers to contact Congress members, to donate to political campaigns, sign petitions or join social media groups.
The article appears in the business and policy of the newspaper and policy of the University of Cambridge.
“We have entered this project that thinking companies will be different from consumers and voters because they have clear economic interests and take care of their end. But it turns out that companies-especially the smallest ones- Similar to individuals, ”said Zhang, who co-wrote the newspaper with Lindsay Dlan of Wesleyan University, Robert Kubinec of the University of South Carolina and Daniel Nielson of the University of Texas in Austin.
Their results also show that the political culture of a company essentially forms whether it looks at tariffs as good or bad. Conservative companies see them as good. Liberal companies are against them. These existing political beliefs were resistant to new information on tariff costs.
Part of the current confusion over tariffs is due to the way the production process changed radically over the past decades.
“Before the 1980s, if a product was produced abroad, it would most likely be made by a foreign company,” Zhang said. “If you upload a border tariff, this will protect your domestic manufacturers for the good, and will hurt foreign manufacturers of that good, which will be a foreign company with a foreign country. It That has happened in the last 40 years with this current era of global value chains is that companies no longer make production in just one country. ”
He points to Apple’s iPhone. It may be designed in California, but it is made in China through the efforts of Taiwanese companies like Foxconn. That company imports components from Japan, Korea, Germany and the United States.
“Chinese factory workers put it together, climb a box and then send it. When sent to the US, this is counted as a Chinese export. But in fact, it is a globally produced and sourced product that mostly benefits Apple, ”he said.
Consequently, the new tariffs set to target China make the iPhone more expensive for US consumers and cuts in its US manufacturer’s profits.
Zhang points out that trade laws and tariff codes are also quite complex.
“Different beef cuts have different tariff codes attached to them. The different braid strands of fabric have different tariff codes. Large companies invest resources to have that information. Smaller companies may not have internal sophistication to understand all this, ”he said.
Zhang’s team created a field experiment to prove this theory. They drafted an online app that provided such companies with a free analysis to ascertain whether this information could lead to action to combat fees. After all, it didn’t happen.
A member of the faculty where since 2019, Zhang is also the founder and director of the trade war lab where. His research explores the political economy of trade and conflict in East Asia. His articles of the past include “political danger and firm’s emergence: evidence from the US -KINIA trade war”, “In the middle: American multinationals in China and the trade war policy” and “Measuring Chinese Economic Sanctions 1949-2020: Presentation of China Ties Ties data ”
“With tariffs, most economists will tell you that both sides are lost,” Zhang said. “It’S’S a race dynamic at the end, and the only way to win is to stop escalating.”