Within the ESG (Environmental, Social, Governance) framework, governmental policies promoting renewable energy can affect international trade competition (Haley and Haley 2013). However, this study examines how trade-induced income shocks influence the scope of local government and find that local governments are more likely to scale back the capital investment in electricity after China joined the WTO in 2001. Regions in the United States facing reduced labor demand and incomes due to increased import competition from China experience corresponding declines in housing prices and business activities (David et al. 2013). Because local governments heavily rely on property and sales taxation, the decrease in property values and economic activity leads to lower revenue, limiting their ability to provide public services. Building on Feler and Senses’ (2017) framework on import shocks, I conduct a more detailed analysis of heterogeneity and identify two crucial dimensions where aggregation affects the outcomes. Local governments in densely populated areas respond differently from those in less populated areas. Additionally, I find that local governments in highly populated commuting zones respond to this decline by reducing their investment in electricity capital rather than electricity current operations expenditure. This not only leads to a long-term decline in public service quality and amenities in trade-exposed areas but also impedes the growth of manufacturing industries that heavily rely on electricity.