Trading Places: How Trade Policy Is Reshaping Multinational Firms' Location

Alejandro Graziano, Monika Sztajerowska and Christian Volpe Martincus

No 21547, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper provides new evidence on tariff-induced reorganization of multinational production. Exploiting the 2018–2019 U.S. tariffs on Chinese goods, we show that Chinese MNEs expanded foreign affiliates disproportionately in third countries with high revealed production suitability for serving the U.S. market, especially in tariff-exposed sectors. Trade agreements with the U.S. amplified this reallocation. We also document that firms anticipated these trade policy changes as tariff increases began to be proposed in 2016-2017. Back-of-the-envelope calculations suggest tariff-induced Chinese FDI in third countries accounts for 43–52% of Chinese cross-border investment projects.

Keywords: Tariffs (search for similar items in EconPapers)
JEL-codes: F13 F21 F23 (search for similar items in EconPapers)
Date: 2026-05
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