Abstract:  Countries do not directly trade; firms do, especially multinational firms (MNCs), which dominate global trade. We investigate the employment and electoral impact of MNC trade with China in the U.S. by examining the ownership structure of U.S.-China trade.  We use two limited-access datasets, including data on the universe of transactions of Chinese trade with the rest of the world between 2000 and 2006. Our analysis of those data reveals that a small number of Chinese and non-Chinese MNCs conducted most of China’s trade with the U.S. and other developed markets. Employing a novel identification strategy—“instrumenting outside the value chain”—we find that the adverse employment and electoral effects associated with the Autor, Dorn, and Hanson (2013) “China Shock” were driven by either Wholly-Foreign Owned Enterprise (WFOE) or related party (RP) imports, not by indigenous Chinese MNC or non-related party imports. In areas where employment was heavily exposed to WFOE or RP imports from China, incumbent U.S. Presidents or their parties experienced significant vote share losses in the 2000-2008 and 1996-2020 elections. In contrast, areas with exposure to high levels of indigenous Chinese imports showed increased employment gains and positive support for incumbents. WFOE and RP imports from China were linked to TAA-certified job losses. In contrast, imports from indigenous Chinese MNCs were associated with decreased TAA job losses. We find minimal partisan effects—incumbents from both parties suffer in regions exposed to high WFOE and RP imports from China. Ultimately, the U.S. employment and electoral impact of the China Shock were rooted in the value-chain activities of global MNCs.

Keywords: U.S. Elections; Trade; China; Multinationals; China Shock