When Growth Stumbles, Pollute? Trade War, Environmental Enforcement, and Pollution

This paper studies how perceived risks of economic downturns affect pollution from the perspective of political incentives and environmental enforcement. In the context of the U.S.-China trade war, we find a 1% increase in the U.S. tariff leads to 0.9% and 0.7% increases in SO2 and PM2.5 in Chinese cities. Hourly data suggests the pollution increases are concentrated at night. The surprising findings can be largely attributed to lenient environmental policies enforced by local government officials who are politically motivated. Cities more exposed to tariffs place less emphasis on environmental issues in local government reports and impose fewer fines on firms violating environmental regulations.