Publications
Publications
- 2024
- HBS Working Paper Series
Exports in Disguise: Trade Re-Routing During the U.S.-China Trade War
By: Ebehi Iyoha, Edmund J. Malesky, Jaya Y. Wen, Sung-Ju Wu and Bo Feng
Abstract
Origin-specific tariffs are a common policy tool; however, critics claim that such tariffs are often circumvented by rerouting goods through intermediary countries. This study examines whether rerouting increased due to the 2018-2019 U.S.–China trade war via Vietnam. We define rerouting at the product level as the maximum value of trade flows from China to the U.S., passing through Vietnam, for identical HS 8-digit products within the same quarter. Additionally, we employ a firm-level definition, which only considers such flows within the same firm.
Our findings indicate that the level of aggregation significantly impacts rerouting estimates. In 2021, 16.1% of Vietnamese exports to the U.S. were identified as product-level rerouting, while only 1.8% were flagged as firm-level rerouting, equivalent to 15.5 billion and 1.7 billion current USD annually. Moreover, the average tariff increase on Chinese exports led to a 5.9 percentage point rise in product-level rerouting, compared to a 0.22 percentage point increase in firm-level rerouting. These increases represented 47.2% and 15.7% of their 2018 levels. These differences underscore the importance of microdata for designing trade policy and assessing compliance.
Our findings indicate that the level of aggregation significantly impacts rerouting estimates. In 2021, 16.1% of Vietnamese exports to the U.S. were identified as product-level rerouting, while only 1.8% were flagged as firm-level rerouting, equivalent to 15.5 billion and 1.7 billion current USD annually. Moreover, the average tariff increase on Chinese exports led to a 5.9 percentage point rise in product-level rerouting, compared to a 0.22 percentage point increase in firm-level rerouting. These increases represented 47.2% and 15.7% of their 2018 levels. These differences underscore the importance of microdata for designing trade policy and assessing compliance.
Keywords
Citation
Iyoha, Ebehi, Edmund J. Malesky, Jaya Y. Wen, Sung-Ju Wu, and Bo Feng. "Exports in Disguise: Trade Re-Routing During the U.S.-China Trade War." Harvard Business School Working Paper, No. 24-072, May 2024.