The U.S.-China Trade War and the Geography of Global Production

Harald Fadinger, Lei Li, Sophia Praetorius and Jan Schymik

No 21855, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study how the U.S.-China trade war affected manufacturing activity in third countries using a novel plant-level dataset covering millions of establishments in 50 major economies, including aliates of more than 200,000 multinational enterprises (MNEs). Combining establishment-level data with detailed tariff information, we estimate the effects of U.S. and Chinese punitive bilateral output and input tari s on sales, employment, and establishments across countries, industries, and stages of production. We find that third-country effects of the trade war are highly heterogeneous and largely offsetting, yielding moderately negative net effects overall. Most of the adjustment is driven by multinational enterprises reallocating activity across affiliate networks, while domestic firms respond much less.

Keywords: Global value chains; Global production network; Multinational enterprise; Trade policy; Us-china trade policy; Trade war (search for similar items in EconPapers)
Date: 2026-08
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