The Effect of the U.S.-China Trade War on U.S. Investment

Mary Amiti, Sang Hoon Kong and David Weinstein

No 14691, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We develop a new method of quantifying the impact of policy announcements on investment rates that makes use of stock market data. By estimating the effect of U.S.-China tariff announcements on aggregate returns and the differential returns of firms exposed to China, we identify their effect on treated and untreated firms. We show theoretically and empirically that estimates of policy-induced stock-market declines imply lower returns to capital, which lowers investment rates. We estimate that the tariff actions through 2018 and 2019 will lower the investment growth rate of listed U.S. companies by 1.9 percentage points by the end of 2020.

Keywords: Protection; Event studies; Adjustment costs (search for similar items in EconPapers)
JEL-codes: E22 F13 F14 (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-int and nep-mac
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Citations: View citations in EconPapers (20)

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Working Paper: The Effect of the U.S.-China Trade War on U.S. Investment (2020)
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