The Global Impact of the U.S.-China Trade War: Firm-Level Evidence

Abstract

This paper documents the impact of the U.S-China trade war on firms worldwide and disentangles the transmission channels involved. Based on a quarterly and up-to-date panel of thousands of listed firms in 40 countries, I establish that firms with export exposure to China have had a decline in revenue, profits and capital stocks since the trade war began, while export exposure to the U.S. has been beneficial. Export exposure to China has been particularly damaging to producers of intermediates and capital goods, signaling a slowdown in Chinese demand for goods that form part of supply chains or that are more sensitive to the business cycle and to policy uncertainty. There are signs that firms across the world have been able to substitute Chinese exports to the U.S. in industries targeted by U.S. tariffs but no signs that they have benefited from Chinese tariffs. These impacts have been highly heterogeneous across geographic regions as well as across firms of different sizes.