US-China trade war did not bring American firms home, research finds
- Foreign investment into China hit a record US$144.4 billion in 2020, while firms exiting China did not leave because of tariffs, US researchers say
- Decoupling has been ‘greater in the minds of politicians and pundits than the reality of firms in China’
In a paper published on the preprint platform SSRN this month, researchers Samantha Vortherms and Jiakun Jack Zhang argued that US tariffs on billions of dollars’ worth of Chinese products – launched in mid-2018 to bring US companies home – hurt the US economy and did not successfully pressure China to change its economic policies.
Vortherms, from the University of California in Irvine, and Zhang, from the University of Kansas, said 46 per cent more US-funded subsidiaries in China closed in 2018 compared with the year before, but less than 1 per cent of that rise was caused by US tariffs.
“Our findings show that US and allied firms were not more likely to exit China, suggesting that foreign direct investment outflows do not ‘follow the flag’.
“Instead, firm exit is determined by the balance of heightened political risks against the availability of firm-level and institutional resources to mitigate these risks.”
