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Supply Chain Adjustments to Tariff Shocks: Evidence from Firm Trade Linkages in the 2018-2019 U.S. Trade War

Author

Listed:
  • Kyle Handley
  • Fariha Kamal
  • Ryan Monarch

Abstract

We use the 2018-2019 U.S. trade war to examine how supply chains adjustments to a tariff cost shock affect imports and exports. Using confidential firm-trade linked data, we show that the decline in imports of tariffed goods was driven by discontinuations of U.S. buyer–foreign supplier relationships, reduced formation of new relationships, and exits by U.S. firms from import markets altogether. However, tariffed products where imports were concentrated in fewer suppliers had a smaller decline in import growth. We then construct measures of export exposure to import tariffs by linking tariffs paid by importing firms to their exported products. We find that the most exposed products had lower exports in 2018-2019, with most of the impact occurring in 2019.

Suggested Citation

  • Kyle Handley & Fariha Kamal & Ryan Monarch, 2024. "Supply Chain Adjustments to Tariff Shocks: Evidence from Firm Trade Linkages in the 2018-2019 U.S. Trade War," Working Papers 24-43, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:24-43
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    File URL: https://www2.census.gov/library/working-papers/2024/adrm/ces/CES-WP-24-43.pdf
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    References listed on IDEAS

    as
    1. Feenstra, Robert C. & Jensen, J. Bradford, 2012. "Evaluating estimates of materials offshoring from US manufacturing," Economics Letters, Elsevier, vol. 117(1), pages 170-173.
    2. Michael E. Waugh, 2019. "The Consumption Response to Trade Shocks: Evidence from the US-China Trade War," NBER Working Papers 26353, National Bureau of Economic Research, Inc.
    3. Mike Waugh, 2019. "The Consumption Response to Trade Shocks," 2019 Meeting Papers 1226, Society for Economic Dynamics.
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    Cited by:

    1. Monarch, Ryan & Schmidt-Eisenlohr, Tim, 2023. "Longevity and the value of trade relationships," Journal of International Economics, Elsevier, vol. 145(C).
    2. Oh, Saera & Lim, Sunghun, 2024. "Geopolitical Risks and Agricultural Trade Diversification in Southern Africa: Port-level Evidence from the Russia-UkraineWar," 2024 Annual Meeting, July 28-30, New Orleans, LA 343735, Agricultural and Applied Economics Association.

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    More about this item

    Keywords

    global supply chains; strategic products; tariffs; trade war;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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