Global Supply Chain Reorganization under the United States-China Trade Tension
Paper Session
Sunday, Jan. 3, 2021 12:15 PM - 2:15 PM (EST)
- Chair: Heiwai Tang, Johns Hopkins University and Hong Kong University
Rising Import Tariffs, Falling Export Growth: When Modern Supply Chains Meet Old-Style Protectionism
Abstract
We examine the impacts of the 2018-2019 U.S. import tariff increases on U.S. export growth through the lens of supply chain linkages. Using 2016 confidential firm-trade linked data, we identify firms that eventually faced tariff increases. They accounted for 84% of all exports and represented 65% of manufacturing employment. For the average affected firm, the implied cost is $900 per worker in new duties. We construct product-level measures of exporters' exposure to import tariff increases and estimate the impact on U.S. export growth. The most exposed products had relatively lower export growth in 2018-2019, with larger effects in 2019. The decline in export growth in 2019Q3, for example, is equivalent to an ad valorem tariff on U.S. exports of 2% for the typical product and up to 4% for products with higher than average exposure.The Impact of US-China Trade War on Taiwan's International Trade
Abstract
We study the impact of the US-China tariff changes in 2018-2019 on the restructuring of global supply chains, using transaction-level trade data from Taiwan. We find significantly positive but delayed effects of US tariffs on Taiwan's exports to and imports from the US, at both the product and firm-product levels. The effects are heterogeneous across product types, with the effects being strongest for consumption goods, followed by capital goods and weakest for intermediate inputs. The trade diversion responses were found mostly among big firms, with some of the small firms actually reducing their trade with the US.Not Coming Home: Trade and Economic Policy Uncertainty in American Supply Chain Networks
Abstract
We study the impact of trade and economic policy uncertainty on supply chain networks of publicly-listed American firms. Beyond the actual trade and other economic policy, the uncertainty around these policies contributes to supply chain risk. Whether such policy uncertainty will bring production back to the U.S. or only a redistribution of the global supply chains is theoretically ambiguous and warrants an empirical analysis. Using firm-level global supply chain data and policy uncertainty indexes, we investigate the question using reduced-form empirical specification with high dimensional fixed effects. Rather than inducing production to come “home,” on average higher U.S. trade policy uncertainty predicts an increase in foreign and decrease in domestic supplier relationships, driven by firms with majority foreign customers. In contrast, those with mostly domestic customers decrease foreign supplier relationships. American firms also appear to substitute among foreign countries in response to foreign-country-specific economic policy uncertainty – shifting suppliers from countries with higher uncertainty to ones with lower uncertainty. Firms with less production flexibility and more bargaining power respond more to all measures of economic policy uncertainty. Our results suggest firms take precautionary action consistent with a trade-off between lowering production cost versus avoiding risk related to trade and economic policy uncertainty.JEL Classifications
- F1 - Trade
- F4 - Macroeconomic Aspects of International Trade and Finance