CEO Ideology and Global Trade

We study how the political ideology of corporate leaders shapes international trade. Exploiting changes in ideological alignment between U.S. firm CEOs and foreign governments around national elections, we show that firms reduce imports from countries whose governments become more ideologically distant from their CEOs, relative to firms whose CEOs become more aligned. Firms whose CEOs become more ideologically distant do not significantly reduce their total imports; instead, they reallocate toward origin countries that are ideologically closer and more expensive to source from. Textual analysis of earnings call transcripts suggests that an important mechanism behind these patterns is a change in CEOs’ perceptions of foreign macroeconomic conditions.