Bank Financing of Global Supply Chains

Laura Alfaro, Maria Brussevich (), Camelia Minoiu and Andrea Presbitero

No 2025-4, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: Finding new international suppliers is costly, so most importers source inputs from a single country. We examine the role of banks in mitigating trade search costs during the 2018–19 US-China trade tensions. We match data on shipments to US ports with the US credit register to analyze trade and bank credit relationships at the bank-firm level. We show that importers of tariff-hit products from China were more likely to exit relationships with Chinese suppliers and find new suppliers in other Asian countries. To finance their geographic diversification, tariff-hit firms increased credit demand, drawing on bank credit lines and taking out loans at higher rates. Banks offering specialized trade finance services to Asian markets eased both financial and information frictions. Tariff-hit firms with specialized banks borrowed at lower rates and were 15 percentage points more likely and three months faster to establish new supplier relationships than firms with other banks. We estimate the cost of searching for suppliers at $1.9 million (or 5 percent of annual sales revenue) for the average US importer.

Keywords: financial frictions; bank lending; supply chains; trade policy (search for similar items in EconPapers)
JEL-codes: F34 F42 G21 (search for similar items in EconPapers)
Pages: 79
Date: 2025-05-19
New Economics Papers: this item is included in nep-cna and nep-fdg
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Published in 2025

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DOI: 10.29338/wp2025-04

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