The Impact of the Us-China Trade War on Us Imports from China : Heterogeneity from Causal Machine Learning1

We use causal forests to evaluate the heterogeneous effects of the US-China trade war on China’s exports to the US. While the exports have decreased by 70% on average after the tariff, causal forests at the HS10 digit reveals that the effects range from -800% to +180%. The products that can be substituted by the rest of world from China were greatly affected by the tariff. The products that use more temporary workers were also hit hard by the tariff. Further analysis shows the products with a combination of high substitutability, high MNC activities, high reliance of temporary workers, and low capital intensity were greatly affected by the tariff. These findings suggest that MNCs located in China, particularly in the light industries with flexible labor market access and low capital intensity, may relocate to other countries that have the ability to manufacture substitutable products to evade the tariffs