Countries do not directly trade, firms do. Multinational firms (MNCs) account for most of the value of global imports and exports. How do MNC trade and investment behaviors in emerging markets affect electoral outcomes in advanced economies? To address this question, we examine 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 2007. The majority of China’s trade with both the U.S. and other developed markets is undertaken by a small number of non-Chinese MNCs. Using a new identification strategy – “instrumenting outside the value chain” – we find that the adverse employment effects of the Autor, Dorn, and Hansen (2013) “China Shock” are driven by non-Chinese MNC imports and not by ‘indigenous’ Chinese firms. We also find related party MNC imports from China are associated with U.S. plant closures, but non-related party imports are not. In regions with high levels of exposure to MNC imports from China, incumbent U.S. Presidents or their parties suffered substantial vote share losses in two election samples: 2000-8 using Chinese data and 1996 to 2020 using U.S. Census data. In comparison, exposure to high levels of non-MNC imports from China had, if anything, positive benefits for incumbents. We find little to no partisanship effect – incumbents from both parties, including President Trump, suffered vote losses in areas exposed to high levels of MNC imports from China. MNC activities in international trade can affect electoral outcomes in advanced economies.

Dennis Quinn is Powers Professor of International Business, McDonough School of Business and Professor, Department of Government, Georgetown University. Research specialties include international political economy, international business, and international economics.