Geography Matters: Evidence from Firms’ Comments on Tariffs in the U.S.-China Trade War
How does geography shape trade policy? This paper explores the redistributive function of trade policy that allows the government to privilege one group at the expense of others and examines how geography channels policymakers' domestic political incentives into trade policy. With the publicly available information of product-level variation in tariff changes, the case of the U.S.-China trade war provides a good opportunity to examine how firms' location affects their political influence. Using a new dataset of public comments on three proposed tariff lists of Chinese imports in 2018, this paper constructs a variable of comment efficacy by assessing whether the changes between the proposed and final tariff lists match the requests to remove or to maintain a specific product code in a comment. The results show that comments from firms in districts that swung to Trump in the 2016 presidential election are likely to have more effective requests than comments from firms in districts that did not switch electoral votes, while comments from firms in districts that swung to Clinton do not have such an effect. The results are robust to the inclusion of lobbying experience and coalition lobbying. This paper provides firm-level evidence of how geography allows politicians to strategically target voters when making the trade policy.