Trade Wars Begin in Boardrooms

Why can economic ties sometimes breed conflict rather than cooperation? I address the question by examining how rising Chinese import competition affects U.S. corporate political activity and, in turn, reshapes lawmaking and trade policy. I find that U.S. companies more exposed to Chinese competition spend significantly more on lobbying against U.S.--China engagement and are more likely to initiate campaign contributions to legislators with whom they had no prior contribution ties. These effects intensify after the onset of the trade war. The impact on new contribution ties is particularly pronounced among legislators with prior records of opposing U.S.--China engagement, consistent with the selection channel of corporate political influence. At the same time, new contribution ties make legislators more likely to sponsor or cosponsor anti-engagement legislation, consistent with the persuasion channel of corporate political influence. Anti-engagement lobbying ultimately translates into protectionist outcomes: higher U.S. tariffs on competing Chinese imports and ultimately a reduction in Chinese competition faced by exposed firms. Overall, the findings highlight how economic shocks can endogenously trigger corporate political mobilization, extending the ``Protection for Sale'' framework to dynamic firm-level responses with lasting policy consequences.