Beyond Tariffs: How Did China’s State–Owned Enterprises Shape the US–China Trade War?

We study the role played by Chinese state–owned firms during the US–China trade war. Based on measures constructed from Chinese firm–level customs microdata, we show that the presence of state–owned enterprises (SOEs) in Chinese imports led to a large negative impact on US exports in addition to the effect of tariffs. Abstracting from general equilibrium effects, while tariffs account for an 8% decline in US exports to China, the SOE effect accounts for a 4% decline. This SOE effect was concentrated toward the end of 2018 and start of 2019, point at which a vast majority of products had already been targeted by tariffs. Further, the SOE effect was concentrated among agricultural goods and industrial supplies, as well as among industries located in US regions with a high share of Republican votes. We also find that US exports were rerouted to the rest of the world in response to Chinese tariffs, but not in response to reduced imports by Chinese SOEs.