Abstract
How did the COVID-19 pandemic affect firm-supplier-customer relationships? We find that, by the end of 2020q1, U.S. firms lost as many as 10.3% of their Chinese suppliers, suffering market value losses of up to $1.4 trillion. Affected U.S. firms were unable to relocate their supply chains, leading to lower inventory, sales, and operating performance. In response, these firms tapped the debt market, and partly built cash reserves. Employment decreased by 5.2%. Chinese suppliers suffered milder consequences. Sourcing from a single manufacturing hub has drawbacks, but policymakers should avoid trade tensions because firms face constraints trying to relocate their supply chains.
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