In the Middle: American Multinationals in China and Trade War Politics

• In Event: Politics of the U.S.-China Trade War

Abstract

The U.S.-China Trade War represents the most serious disruption to global supply chains since their emergence. We investigate firm-level political responses of American multi-national corporations (MNCs) in China using a new dataset on foreign-invested enterprises (FIEs) from annual registration records filed with the Ministry of Commerce. We identify the China-based subsidiaries of U.S. firms in order to quantify their exposure to the trade war. We use this data to explain the political behavior of these MNCs in the U.S. using another original dataset on firm-level responses to tariffs coded from observed political behaviors such submitting a comment, filing for tariff exclusion, or lobbying members of Congress. We also examine which companies exit the China market. This analysis reveals the industry and policy cleavages that divide American MNCs over trade policy with China. We find that larger MNCs are resilient to both tariffs and to political pressure to decouple from China due to privileged access to tax havens and various regulatory loopholes as well as greater market power. These larger MNCs are less likely to seek for tariff exclusion and submit public comment, but they are also less likely to exit China.

Authors

• Jiakun Zhang, University of Kansas

• Samantha Vortherms, University of California, Irvine

• Rigao Liu, University of Kansas