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Going after #Trump? Evidence from the #tradewar. This is a brief thread describing a new paper that it is joint work with Carlo Schwarz @Warwick_Econ PhD student (going on the market this year). The paper circulates as @cepr_org - ungated WP ssrn.com/abstract=33490… 
The question we ask is quite simple: were the retaliation measures triggered by China, the #EU, and the #NAFTA against Trump's tariffs politically targeted? We study the trade escalation triggered by US steel tariffs and various #Section301 #tariffs.
Interestingly, this is the first trade dispute in a long time that actually escalated to that level. The last case that came close was also the case of steel tariffs in the early 2000s -- but then retaliation measures, while being threatened, were never triggered as US caved in.
Using data from @BrookingsEcon #ExportMonitor and other sources we document that retaliation is sharply calibrated to hit areas that swung to support #Trump in 2016 (but not to areas that swung to support Republican candidates running for other offices in the same areas in 2016)
Figure shows steep gradient highlighting that areas that saw higher levels of support for @realDonaldTrump saw significantly higher retaliation exposure. Similarly, right fig highlights distinctly higher level of retaliation exposure in areas that saw increase in GOP vote share.
Retaliation is hitting areas that swung to Trump as GOP pres. candidate between 2012 & 2016 -- but not to areas that swung to support other GOP candidates running at the same time eg for House or Senate. This highlights that retaliation is well calibrated to go after Trump.
Was retaliation optimally chosen? We simulate alternative retaliation bundles that could have been chosen & measure the implied strength of political targeting. We plot distribution of measures with vertical line indicating the targeting measure associated with actual retaliation
Chinese retaliation is on upper end, but China is ultimately running up against a constraint in retaliation design due to trade imbalance with US. EU and NAFTA could have realized higher political targeting. Though would that have come at a cost?
We study whether there is a trade-off between hitting Trump where it may hurt him vis-a-vis making imports from US more expensive, where the US is dominant supplier. EU Regulation 654 (P 3) makes it quite clear what EU's objectives are in a trade dispute publications.europa.eu/en/publication…
We construct the distribution of the political targeting and the implied distribution of US market share in imports of a simulated retaliation basket. The EU is quite good in picking a retaliation bundle that has high degree of political targeting while limiting potential damage
Canadian, Mexican and Chinese retaliation -- on other hand -- may be suboptimal as other retaliation bundles exist that have higher strength of political targeting or at the least, lower exposure for the own economy.
#EU uses an algorithm to develop retaliation response that has been described as the EU's ``Weapon of War'' and hence, is a closely guarded secret. It seems to be doing a decent job from what we can see.
Read whole paper here ssrn.com/abstract=33490… @SamuelMarcLowe @bueti @warwickecon @cage_warwick @BenChu_
