Comparative Analysis of Tariffs-Restricted Trade Wars between the United States and China Under the Recent Past Four Presidents: Did they Achieve Their Objectives?

Abstract

This paper provides a comparative analysis of the tariffs-restricted trade wars between the United States and China under the recent past four presidents of the United States by using the difference-in-differences estimator framework. The overarching objective of three of the four presidential administrations that engaged in trade wars was to reduce the United States’ trade deficits with China. This raised some research questions. Did each administration achieve its objective of reducing the trade deficits with China? If so, which administration more effectively reduced the trade deficits in comparison to their immediate predecessor? What lessons can future administrations and governments around the world draw from the outcomes of the tariffs-restricted trade wars between the United States and China?  To determine which president – Trump, Obama, and Bush – most effectively utilized import tariffs to reduce the trade deficits with China, we specified and tested three different sets of hypotheses. In sync with a controlled experiment, we tested another three sets of hypotheses in which we compared Presidents Trump, Obama, and Bush to President Clinton who did not impose tariffs on China. Based on our estimated results, we rejected all the null hypotheses in favor of the alternative hypotheses, which suggest that Presidents Trump, Obama, and Bush did not achieve any significant reduction in the United States’ trade deficits with China through the use of tariffs relative to President Clinton. The important lesson drawn from these findings is that tariffs are counterproductive and ineffective policy strategy.