Trade Networks and Firm Value: Evidence from the US-China Trade War

59 Pages Posted: 26 Aug 2018 Last revised: 21 Aug 2020

See all articles by Yi Huang

Yi Huang

Graduate Institute of International and Development Studies

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Sibo Liu

Department of Economics, Lingnan University

Heiwai Tang

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS); The University of Hong Kong - Faculty of Business and Economics; CESIfo; Kiel Institute for the World Economy

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Date Written: August 20, 2020

Abstract

We study the financial impact of the 2018-2019 U.S.-China trade war on firms engaged in global supply chains. Around the dates when higher tariffs were announced, U.S. firms depending more on exports to and imports from China experienced larger declines in market values. Guided by a model that identifies various direct and indirect trade channels through which tariffs affect firms’ profits, we examine the transmission of tariff shocks through firms’ suppliers and customers. We confirm our results by exploiting the within-firm variation in product exposure based on two tariff lists and a positive trade negotiation as a reverse experiment.

Keywords: firm value, event study, trade policy, offshoring, global value chains

JEL Classification: F10, G12, G14, O24

Suggested Citation

Huang, Yi and Lin, Chen and Liu, Sibo and Tang, Heiwai, Trade Networks and Firm Value: Evidence from the US-China Trade War (August 20, 2020). Available at SSRN: https://ssrn.com/abstract=3227972 or http://dx.doi.org/10.2139/ssrn.3227972

Yi Huang

Graduate Institute of International and Development Studies ( email )

PO Box 136
Geneva, CH-1211
Switzerland

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Sibo Liu

Department of Economics, Lingnan University ( email )

8 Castle Peak Rd, Tuen Mun
Hong Kong

Heiwai Tang (Contact Author)

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS) ( email )

1740 Massachusetts Avenue, NW
Washington, DC 20036-1984
United States

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

CESIfo ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

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