Global Supply Chains and Domestic Lobbying: Evidence from the U.S.-China Trade War

Abstract

This study integrates the political lobbying and market strategies in the setting of protectionism. I argue that multinational firms are incentivized to employ political lobbying to address disruptions to their global supply chains caused by domestic protectionist policies. I further theorize that the lobbying strategy critically hinges on firms’ market strategies including the use of specialized inputs and level of commitments to foreign markets. Empirically, I examine the U.S.-China trade war using a novel firm-level panel dataset and a difference-in-differences design. In addition, I investigate how firms benefit from lobbying and find that lobbying firms gain greater access to policy formulation and more favorable regulatory enforcement in the exclusion process.