Global Supply Chain Adjustments after Tariff Threats – Aoife Hanley

Speaker

Aoife Hanley (Kiel Institute and Kiel University (CAU))

Abstract

Though an increasingly popular tool to gain bargaining power in global negotiations, tariff threats have been somewhat neglected in the literature.  By using China’s tariff threat against EU wine as a natural experiment and using Chinese firm-product-source-year data, we conduct a triple differences analysis, investigating how a Global Supply Chain (GSC) disrupts and reconfigures in response to a tariff threat. We report significant disruption to the GSC, a finding which remains robust under various specifications.  Additionally, we observe how the supply chain shock spills over, at both the regional and product level. A desire for certainty is the major reason that Chinese importers opt to cut supply from EU vendors, despite the increase in cost from diverting supply. The result is a significant shift in supply, replacing supply from the EU with alternatives from the ‘New World’. 

Authors

Holger Görg (Kiel Institute and Kiel University (CAU))  — Aoife Hanley (Kiel Institute and Kiel University (CAU)) — Haiou Mao (Wuhan University) — Liu Yang (Wuhan University)

Room

Media Room (A-211)