Implications of rising trade tensions for FDI projects

Emily Blanchard, Amelia Santos-Paulino, Claudia Trentini and Emmanuel Milet

UNCTAD Transnational Corporations Journal

Abstract: This paper offers preliminary evidence of the extent to which global FDI patterns have responded to the sharp increase in trade barriers since 2018, focusing in particular on the impact of new United States tariffs imposed on imports from China. Using detailed project-level data on new greenfield FDI as well as complementary research, this paper tracks the differential changes in FDI across countries and industries most affected by the trade tensions. There is some evidence of diversion to South-East Asia in specific industries, confirming findings of other research, but the aggregate effect on investment in China is limited and the overall effect on investment in South-East Asia is actually negative. A possible explanation lies in the importance of global value chain linkages as key determinants of firms’ investment decisions.

Date: 2021-08-31
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Persistent link: https://EconPapers.repec.org/RePEc:unc:tncjou:71

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