Geopolitical Risk and Decoupling: Evidence from U.S. Export Controls

58 Pages Posted: 18 Sep 2023 Last revised: 1 Apr 2024

See all articles by Matteo Crosignani

Matteo Crosignani

Federal Reserve Banks - Federal Reserve Bank of New York

Lina Han

University of Massachusetts Amherst, Isenberg School of Management

Marco Macchiavelli

Isenberg School of Management

André F. Silva

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: September 6, 2023

Abstract

Amid the current U.S.-China technological race, the U.S. has imposed export controls to deny China access to strategic technologies. We document that these measures prompted a broad-based decoupling of U.S. and Chinese supply chains. Once their Chinese customers are subject
to export controls, U.S. suppliers are more likely to terminate relations with Chinese customers, including those not targeted by export controls. However, we find no evidence of reshoring or friend-shoring. As a result of these disruptions, affected suppliers have negative abnormal stock returns, wiping out $130 billion in market capitalization, and experience a drop in bank lending, profitability and employment.

Keywords: geopolitical risk, export controls, decoupling, supply chains

JEL Classification: G12, F51, F38

Suggested Citation

Crosignani, Matteo and Han, Lina and Macchiavelli, Marco and Silva, André F., Geopolitical Risk and Decoupling: Evidence from U.S. Export Controls (September 6, 2023). Available at SSRN: https://ssrn.com/abstract=4563485 or http://dx.doi.org/10.2139/ssrn.4563485

Matteo Crosignani

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Lina Han

University of Massachusetts Amherst, Isenberg School of Management ( email )

Amherst, MA 01003
United States

Marco Macchiavelli (Contact Author)

Isenberg School of Management ( email )

Amherst, MA 01003
United States

André F. Silva

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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