Tariffs, Agricultural Subsidies, and the 2020 US Presidential Election: Unintended Consequences

Abstract

This paper provides evidence on the unintended effects of US and Chinese agricultural trade policies on the 2020 US presidential election. In response to a series of US tariffs imposed on Chinese goods, China imposed retaliatory tariffs on US agricultural products. 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 assess whether the incumbent strategically manipulated MFP payments in order to win votes in the 2020 presidential election. By defining net MFP as the difference between the MFP payment and the damage of the Chinese retaliatory agricultural tariff at the county level, we document that Republican-leaning counties, not swing states, saw an increase in the net MFP, providing a more nuanced picture of possible strategic manipulation. We then find that US agricultural subsidies overcompensated US voters in ways that 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 unexpectedly exacerbated political polarization in the US, especially the rural-urban divide.

Keywords: Agricultural Subsidy, Trade War, Trade Policy, Presidential Election, Market Facilitation Program, Tariffs, Political Polarization, Political Budget Cycle

JEL Classification: D72, F13, F14, Q17, Q18, I18