Winners and Losers From the US-China Trade War

Introduction

We investigate trade reallocations across countries during the US-China trade dispute. Using US import data, we find evidence of trade diversion in a range of industries and products, including products not targeted by US tariffs. We uncover three main underlying mechanisms. First, countries with a greater revealed comparative advantage in a product benefit more from these tariffs. Second, non-targeted products in similar industries are also affected, consistent with colocation effects. Third, countries that export more of a given product to the US because of the tariffs on China also export more of the same product to other countries as predicted by the Melitz model.