The U.S.–China Trade War and the Geography of Global Production

We study how the U.S.–China trade war affected manufacturing activity in third countries using a novel plant-level dataset covering millions of establishments in 50 major economies, including affiliates of more than 200,000 multinational enterprises (MNEs). Combining establishment-level data with detailed tariff information, we estimate the effects of U.S. and Chinese punitive bilateral output and input tariffs on sales, employment, and establishments across countries, industries, and stages of production. We find that third-country effects of the trade war are highly heterogeneous and largely offsetting, yielding moderately negative net effects overall. Most of the adjustment is driven by multinational enterprises reallocating activity across affiliate networks, while domestic firms respond much less.