Seminar Vol. 126

Title: Trade Linkages and Firm Value: Evidence from the US-China "Trade War"

Speaker: Heiwai Tang, Johns Hopkins University

Time: January 17th, 2019 13:30–15:00

Venue: Conference Room 106B, Zhonghui Building (IESR, JNU College of Economics)

About the speaker:

Heiwai Tang is Associate Professor of International Economics at the Johns Hopkins School of Advanced International Studies. He is also Research Fellow at the Federal Reserve Bank of Dallas, the Center of Economic Studies and Ifo Institute in Germany, and the Globalization and Economic Policy Center in the U.K. Before joining Johns Hopkins, he was a faculty at Tufts University and Hong Kong University of Science and Technology. He has been a consultant to the World Bank, International Finance Corporation, United Nations, and Asian Development Bank, and held visiting positions at Stanford University, MIT, Harvard University, and the IMF. He is on the editorial boards of Journal of Comparative Economics and China Economic Review. Heiwai Tang received his Ph.D. in Economics from MIT. His research interests span a wide range of theoretical and empirical topics in international trade, with a specific focus on production networks and global value chains. His research has been published in leading journals in economics, including American Economic Review, Journal of International Economics, and Journal of Development Economics. He has also written articles for Financial Times, Foreign Policy, the Brookings Institution, and the Peterson Institute for International Economics.

Abstract:

On March 22, 2018, Trump proposed to impose tariffs on up to $50 billion of Chinese imports leading to a significant concern over the “Trade War” between the US and China. We evaluate the market responses to this event for firms in both countries, depending on their direct and indirect exposures to US-China trade. US firms that are more dependent on exports to and imports from China have lower stock and bond returns but higher default risks in the short time window around the announcement date. We also find that firms’ indirect exposure to US-China trade through domestic input-output linkages affects their responses to the announcement. These findings suggest that the structure of US-China trade is much more complex than the simplistic view of global trade that engendered Trump’s “Trade War” against China.