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.

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