Dual Effects of the US-China Trade War and COVID-19 on United States Imports: Transfer of China's industrial chain?

TL;DR

This study analyzes how the US-China trade war and COVID-19 pandemic affected US imports, revealing complex supply chain shifts including diversification and re-integration with China and Southeast Asia.

Contribution

It provides a detailed analysis of the distinct and combined impacts of trade tariffs and pandemic disruptions on US import patterns and global supply chain dynamics.

Findings

Tariffs reduced US imports from China.

Southeast Asian exports increased in Chinese-centered supply chains.

COVID-19 lockdowns led to increased direct and indirect imports from China.

Abstract

The trade tension between the U.S. and China since 2018 has caused a steady decoupling of the world's two largest economies. The pandemic outbreak in 2020 complicated this process and had numerous unanticipated repercussions. This paper investigates how U.S. importers reacted to the trade war and worldwide lockdowns due to the COVID-19 pandemic. We examine the effects of the two incidents on U.S. imports separately and collectively, with various economic scopes. Our findings uncover intricate trading dynamics among the U.S., China, and Southeast Asia, through which businesses relocated portions of their global supply chain away from China to avoid high tariffs. Our analysis indicates that increased tariffs cause the U.S. to import less from China. Meanwhile, Southeast Asian exporters have integrated more into value chains centered on Chinese suppliers by participating more in assembling and completing products. However, the worldwide lockdowns over pandemic have reversed this trend as, over this period, the U.S. effectively imported more goods directly from China and indirectly through Southeast Asian exporters that imported from China.