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Just passing through? The US-China trade war and reconfiguration of global value chains through Vietnam

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Listed:
  • Zou, Tao
  • Gong, Yundan

Abstract

We study how third-country supply chains reconfigure under the 2018-2019 US tariff escalation on Chinese goods, using comprehensive transaction-level trade and domestic business-to-business records for firms in Vietnam. Exploiting exogenous variation in firm-level tariff exposure constructed from pre-treatment export portfolios, we find that both value-added processing and transshipment contribute to triangular trade through Vietnam, but activate on distinct timelines: transshipment responds immediately while processing activates mainly after the May 2019 escalation signals tariff permanence. Supply chain network adjustment precedes trade value expansion, with upstream Chinese supplier diversification beginning first, local intermediate sourcing activating later, and downstream US buyer adjusting last. Opening the third-country supply chain interior, we show that over half of the tariff-induced local sourcing expansion channels Chinese intermediate content, and that local sourcing from China-embedded local suppliers responds at 3.2 times the magnitude of independent local suppliers. These results indicate that global value chains relocation to Vietnam activated processing capacity but extended rather than displaced Chinese supply chain influence in the third country.

Suggested Citation

  • Zou, Tao & Gong, Yundan, 2026. "Just passing through? The US-China trade war and reconfiguration of global value chains through Vietnam," LSE Research Online Documents on Economics 139083, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:139083
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    File URL: https://researchonline.lse.ac.uk/id/eprint/139083/
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    References listed on IDEAS

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    1. Alonso Alfaro-Ureña & Isabela Manelici & Jose P Vasquez, 2022. "The Effects of Joining Multinational Supply Chains: New Evidence from Firm-to-Firm Linkages," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(3), pages 1495-1552.
    2. Julia Cajal-Grossi & Rocco Macchiavello & Guillermo Noguera, 2023. "Buyers’ Sourcing Strategies and Suppliers’ Markups in Bangladeshi Garments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 138(4), pages 2391-2450.
    3. Karin Mayr-Dorn & Gaia Narciso & Duc Anh Dang & Hien Phan, 2023. "Trade diversion and labor market adjustment: Vietnam and the U.S.-China trade war," Trinity Economics Papers tep0923, Trinity College Dublin, Department of Economics.
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    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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