The US-China Trade War and the Relocation of Global Value Chains to Mexico

Hâle Utar, Alfonso Cebreros Zurita, Luis Bernardo Torres Ruiz and Hale Utar
Authors registered in the RePEc Author Service: Hale Utar

No 10638, CESifo Working Paper Series from CESifo

Abstract: Using confidential longitudinal firm-level trade data from Mexico (2015–2021), we examine whether the 2018/19 US-China trade war triggered adjustments in Global Value Chains (GVCs) and nearshoring to Mexico. Leveraging the abrupt US trade policy shift as a natural experiment, we construct firm-level trade policy exposures based on pre-shock product portfolios and find that US tariff hikes on China significantly increased Mexican firms’ exports to the US, imports from Asia and the US, and net exports overall. By distinguishing IMMEX export-platform firms and identifying their parent countries, we show that GVC participant firms—particularly foreign multinational enterprises (MNEs)—were the primary channels of this adjustment, with export growth concentrated in technology-intensive industries and driven largely by existing intermediate products. The trade war also reshaped sourcing patterns, boosting the use of firm-specific duty permits. Heterogeneous responses between US and non-US foreign MNEs highlight nearshoring dynamics and GVC reorganization toward Mexico. These findings provide firm-level evidence of the transformative impact of trade policy on GVCs and the pivotal role of MNEs in channeling trade policy spillovers to third countries.

Keywords: trade war; Global Vvalue Chains; Supply Chain Adjustment; MNEs; nearshoring; Mexico; US; China (search for similar items in EconPapers)
JEL-codes: F13 F14 F23 F61 F68 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-cna, nep-ifn and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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