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Trading Places: How Trade Policy Is Reshaping Multinational Firms' Location

Author

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  • Graziano, Alejandro
  • Sztajerowska, Monika
  • Volpe Martincus, Christian

Abstract

This paper provides new evidence on tariff-induced reorganization of multinational production. Exploiting the 2018–2019 U.S. tariffs on Chinese goods, we show that Chinese MNEs expanded foreign affiliates disproportionately in third countries with high revealed production suitability for serving the U.S. market, especially in tariff-exposed sectors. Trade agreements with the U.S. amplified this reallocation. We also document that firms anticipated these trade policy changes as tariff increases began to be proposed in 2016-2017. Back-of-the-envelope calculations suggest tariff-induced Chinese FDI in third countries accounts for 43–52% of Chinese cross-border investment projects.

Suggested Citation

  • Graziano, Alejandro & Sztajerowska, Monika & Volpe Martincus, Christian, 2026. "Trading Places: How Trade Policy Is Reshaping Multinational Firms' Location," CEPR Discussion Papers 21547, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:21547
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    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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