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

Abstract

This paper provides evidence on the unintended 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 find that US agricultural subsidies outweighed Chinese retaliatory tariffs and led to an increase in the Republican vote share in the 2020 presidential election. The impact is more pronounced in solidly Republican states, implying that Trump allocated rents in exchange for political patronage. However, the MFP payments were not influential enough in swing states to win the 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.