Connect to certainty: Domestic trade network and trade policy uncertainty

Xiaohua Bao, Deting Gao, Yaning Wei, Wentao Wu and Jie Zhang

Finance Research Letters, 2025, vol. 82, issue C

Abstract: Amid rising geopolitical tensions and frequent changes in trade policies, trade policy uncertainty (TPU) poses a major challenge for global businesses. This paper empirically examines how firms' domestic trade networks influence their perception of TPU, using a unique dataset of supplier-customer relationships from Chinese listed companies. We find that an increase in network centrality reduces perceived TPU. Further analysis suggests that domestic trade networks mitigate TPU primarily by reducing informational frictions and alleviating financing constraints. This study provides evidence that domestic trade networks can mitigate firms' foreign risks and contributes to a deeper understanding of the precise measurement and determinants of TPU.

Keywords: Domestic trade networks; Trade policy uncertainty; Supply Chain (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325008980

DOI: 10.1016/j.frl.2025.107639

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