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The effect of the US–China trade war on Chinese new firm entry

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  • Cui, Chuantao
  • Li, Leona Shao-Zhi

Abstract

This study offers new empirical evidence on the connection between international trade and domestic entrepreneurial activities. Exploiting the tariff variation across industries and time during the recent US–China trade war, we find that the US import tariff increases are associated with relative reductions in Chinese new firm entry rates. The negative impact is more pronounced among industries that are dependent on US exports and with a higher irreversible investment ratio. Heterogeneity across regions with varying institutional quality is also identified. Robustness tests are provided.

Suggested Citation

  • Cui, Chuantao & Li, Leona Shao-Zhi, 2021. "The effect of the US–China trade war on Chinese new firm entry," Economics Letters, Elsevier, vol. 203(C).
    • Handle: RePEc:eee:ecolet:v:203:y:2021:i:c:s0165176521001233
    DOI: 10.1016/j.econlet.2021.109846
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    References listed on IDEAS

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    Cited by:

    1. Chor, Davin & Li, Bingjing, 2024. "Illuminating the effects of the US-China tariff war on China’s economy," Journal of International Economics, Elsevier, vol. 150(C).
    2. Chen, Yanhua & Pantelous, Athanasios A., 2022. "The U.S.-China trade conflict impacts on the Chinese and U.S. stock markets: A network-based approach," Finance Research Letters, Elsevier, vol. 46(PB).
    3. Marc Atkins & Christian Peitz, 2023. "The world's largest free trade agreement RCEP and its financial markets - A perspective on volatility and risk," Working Papers Dissertations 113, Paderborn University, Faculty of Business Administration and Economics.
    4. Leona Shao-Zhi Li & Yize Liu & Jia Yuan, 2024. "The effect of the U.S.–China trade war on Chinese corporate innovation: A curse or a blessing?," Working Papers 202418, University of Macau, Faculty of Business Administration.
    5. ITO Tadashi, 2022. "The Effects of Trump's Trade War with China on Japan's Trade," Discussion papers 22019, Research Institute of Economy, Trade and Industry (RIETI).

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    More about this item

    Keywords

    International trade; US–China trade war; Tariff shocks; Firm entry; Entrepreneurship;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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