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The Impact of the China-U.S. Trade War on China’s Outward Foreign Direct Investment

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  • Dai,Mi

Abstract

This paper examines the impact of the China-U.S. trade war on China’s outward foreign direct investment (OFDI) at the firm level. We use newly released data on the number of foreign subsidiaries of publicly listed Chinese firms up to December 2023, and construct firm-level exposure to trade-war tariffs for both outputs and inputs. Our findings indicate that higher U.S.tariffs on Chinese exports and higher Chinese tariffs on U.S. inputs have led to an increase in OFDI by Chinese firms. This effect is particularly pronounced for investments in ASEAN countries and is also evident for investments in Mexico. However, we find no increase in Chinese investment in the U.S. Overall, our results align with recent media reports suggesting that Chinese firms increasingly use third countries, particularly low-wage developing nations, as “bridges” to accessthe U.S. market following the trade war.

Suggested Citation

  • Dai,Mi, 2025. "The Impact of the China-U.S. Trade War on China’s Outward Foreign Direct Investment," IDE Discussion Papers 955, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper955
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    File URL: https://ir.ide.go.jp/record/2001293/files/IDP000955_001.pdf
    File Function: First version, 2025
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    More about this item

    Keywords

    Outward foreign direct investment|China-US trade war|Tariffs;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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