Domestic Conflicts and Trade Protectionism: Evidence from Tweets

The “domestic conflict theory” demonstrates that non-trade factors may lead to trade protectionism, especially when faced with domestic governance crisis, politicians are more inclined to adopt trade protection policies in order to divert domestic conflicts and win voters’ support. After analyzing 31166 Trump’s tweets, this study provides empirical evidence for how non-trade factors attribute to the China-US trade war. This study finds that non-trade factors that reflect the domestic conflicts in the United States, such as Trump’s disapproval rating and VIX index, have a significant impact on whether Trump posts negative tweets involving China’s economic and trade issues. On the contrary, those trade-related factors’ effect is not significant. After the signing of the phase one trade deal, the mechanism between domestic conflict and Trump’s trade protectionism has not fundamentally changed. This study also shows that tweeting against China can win public support and attention. This study contributes to the literature by providing empirical evidence for how domestic conflict factors contribute to trade protectionism. It also provides us with fresh insights into the causes of China-US trade war. One implication is that given that the US is unlikely to sort out its domestic governance problems in the near future, China will most likely face continued protectionist pressure from the US.