Countries increasingly deploy origin-specific tariffs as geopolitical instruments, and the 2018 US–China trade war is a leading example. Prior research has found that this conflict triggered substantial trade reallocation; however, the proportion of these changes attributable to evasive rerouting versus production relocation remains unclear. We address this gap by introducing a general, replicable rerouting measure, which we apply to transaction-level data from Vietnam during the 2018-2019 trade war. Exploiting variation in tariff exposure and timing, we show that the share of Vietnam’s exports to the US rerouted from China increased by 1.74 percentage points for the average tariff hike, and the increase was driven by new establishments and Chinese-owned firms. Our decomposition of Vietnam’s export growth to the US between 2018 and 2021 suggests that 8.8% of the $52.8 billion increase was due to rerouting whereas 39.8% reflected domestic value-added.

This paper studies the welfare implications of the US–China trade war in Vietnam. Utilizing an enterprise survey in Vietnam that covers the universe of registered firms with information on their capital ownership, I provide novel evidence that Vietnam’s positive responses in employment and exports in 2017–2019 are driven mainly by foreign-owned manufacturers. To further understand the welfare gains of the trade war episode, I develop and estimate a quantitative model of trade participation with foreign ownership, where foreign-owned and domestic manufacturers differ in their distributions of productivity and fixed costs to participate in sourcing and exporting activities. A foreign demand shock to Vietnam of a magnitude similar to that of the trade war raises the real expenditure in the model by 5 percent, predominantly from an increase in labor income.

This paper studies how liberalizing outward foreign direct investments (FDI) affects manufacturers’ engagement in global production and their domestic workers’ labor market outcomes. Focusing on a liberalization policy in 2001 by the government of Taiwan that allowed 122 electronic products to be produced in China, we estimate its effect on Taiwanese electronic manufacturers and their domestic workers. Employing a matched difference-in-differences strategy, we find that the manufacturers targeted by the policy were on average 14% more likely to invest in China relative to the non-targeted ones. Correspondingly, the domestic incumbent workers of the targeted manufacturers were on average more likely to change their jobs, stay employed for fewer years, and have lower wages in subsequent years relative to those employed by the nontargeted ones. The worker-level effects of the policy exhibited substantial heterogeneity across the initial wage distribution, with the top-decile workers benefiting and the other workers losing on average.