Trade Protectionism and Export Adjustment on the Extensive Margin: An Analysis Based on the China–U.S.Trade War

Abstract

Based on highly disaggregated customs data from 2016–19, this paper investigates the impact of the China–U.S. trade war on the expor ts of Chinese firms, from the perspective of the extensive margin of product scope. The paper finds that the rise in U.S. impor t tariffs during the trade war led to Chinese expor ters concentrating on production of their core products and shrinking their expor t scope. Higher impor t tariffs resulted in an average 2.43 percent decline in expor t scope and an average 1.25 percent increase in the expor t share of core products. The damage was par ticularly pronounced for intermedi-ate products and heterogeneous products, which is consistent with the high duties. The paper provides direct evidence on the harm to expor t diversification caused by the China–U.S. trade war, suggesting a welfare loss from the decrease in product variety, as emphasized in the literature. This result holds after controlling for factors such as production cycles and heterogeneity.