Tariffs, agricultural subsidies, and the 2020 US presidential election

Abstract

This paper provides evidence on the effects of US and Chinese trade policies on the 2020 US presidential election. In response to a series of US tariffs imposed on Chinese goods, China imposed retaliatory tariffs, especially on US agricultural products, which largely affected Republican-leaning counties. The US government then subsidized US farmers by providing direct payments through the Market Facilitation Program (MFP) to mitigate the Chinese retaliatory tariffs. Using the universe of actual county-level MFP disbursement data, we first document that US agricultural subsidies relative to the Chinese retaliatory tariff exposure were especially higher in solidly Republican counties, implying that Trump allocated rents in exchange for political patronage. Then, we find that US agricultural subsidies outweighed Chinese retaliatory tariffs and led to an increase in the Republican vote share in the 2020 presidential election. Finally, we uncover evidence that China's retaliatory trade policy and US agricultural policy exacerbated political polarization in the US, especially the rural-urban divide.

Farmers' reactions to the US–China trade war: Perceptions versus behaviors

“…This article relates and contributes to three lines of literature. First, this study extends the literature on how trade policies (Autor et al, 2020;Che et al, 2022), including the US-China trade war (Choi & Lim, 2022;Janzen et al, 2021), impact political outcomes. The results demonstrate that the polarizing effects of trade policies may be due to partisan bias in perceptions.…”

“…On the one hand, China imposed several waves of retaliatory tariffs on US agricultural exports (Bown & Kolb, 2021), targeting the Republican voter base (Fetzer & Schwarz, 2021). On the other hand, the MFP tends to over‐compensate farmers in general (Balistreri et al, 2020, Grant et al, 2021, Janzen & Hendricks, 2020), especially in Republican counties (Choi & Lim, 2022). Previous studies suggest that US voters are responsive to trade policies related to China (Autor et al, 2020; Che et al, 2022), including the 2018 trade war.…”

“…Previous studies suggest that US voters are responsive to trade policies related to China (Autor et al, 2020; Che et al, 2022), including the 2018 trade war. For example, Choi and Lim (2022) find that Market Facilitation Program (MFP) payments net tariff‐induced income loss increase the Republican vote. Similarly, Janzen et al (2021) find that MFP payments increase voter turnout for President Trump.…”

“…For example, Autor et al (2020) find that exposure to trade competition increases support for representatives from the local majority party, regardless of which party it is. Janzen et al (2021) find that MFP payments only increase voter turnout for President Trump and do not induce “vote switching.” Choi and Lim (2022) find that the impact of net MFP payments is high in solidly Republican states and almost negligible in solidly Democratic states. Following a strand of literature on partisan biases (see reviews in Bullock & Lenz, 2019; Jerit & Zhao, 2020), this study provides evidence that farmers' political alignments filter their perceptions of the trade war's impacts.…”

“…We collected data from a 2019 mixed‐mode survey of 471 crop farmers with over 250 acres of land in operation in Iowa, Illinois, and Minnesota. In per capita terms, the Midwest is one of the regions most affected by trade war tariffs and received the highest MFP payments (Choi & Lim, 2022; Yu et al, 2022). The medium to large farmers we surveyed experience tangible and significant impacts of the US–China trade war, making them ideal for studying reactions to trade policies.…”