Assessing the Trade War's Impact on Foreign Invested Enterprises

• In Event: Chinese Politics Mini-Conference: China And The World

Abstract

The U.S.-China Trade War represents the most serious disruption to global supply chains since their emergence. Since 2018, average tariffs levied on Chinese imports have risen from 3% to over 20% and could cover nearly all imports from China after December 15. Many of these "Chinese" imports, however, come in the form of intra-firm trade between foreign-owned subsidiaries of American companies. Yet the evidence is mixed on whether U.S. tariffs have forced companies to shift supply chains out of China or "bring jobs home to America" as President Trump has promised. We investigate firm¬ level changes in China-based supply chains using a new dataset on foreign-invested enterprises (FIEs) in China. The dataset originates from the Ministry of Commerce, spanning officially registered firms from 2014 to 2019. We use industry classifications to determine whether or not FIEs negatively impacted by the trade war shift production out of China, leaving the dataset in 2018 and 2019. We also observe temporal variation in establishing FlEs-whether fewer new FlEs in tariff impacted industries register since 2018-as well as track regional variations in FIE registration-whether more firms registering in border provinces like Guangxi to evade tariffs by transshipping from Vietnam-using this new data. We supplement this quantitative analysis with firm-level case studies by matching U.S. firms that participated in the Section 301 hearings process with their China-based subsidiaries to better understand the impact of the tariffs on the firm's supply-chains.

Authors

• Samantha Vortherms, University of California, Irvine

• Jiakun Zhang, University of Kansas